Cheniere Energy Inc. and Gaz de France (GDF) agreed to a framework to buy and sell liquefied natural gas (LNG) in European and North American markets over a 15-year period. Under the plan, Cheniere agreed to purchase seven LNG cargoes from GDF in 2008.
The agreements announced Thursday are between the companies’ subsidiaries Houston-based Cheniere Marketing Inc. and GDF International Trading S.A.S., which is based in France. The transactions remain subject to approval by the companies’ boards of directors.
“The increasing connectivity between the European and North American gas markets will require new business models and creative agreements,” said Cheniere CEO Charif Souki. “Gaz de France’s position in Western Europe complements Cheniere’s position in the Gulf of Mexico (GOM) to provide both companies increased flexibility and access to premium markets. We are delighted by this important strategic step and look forward to continuing to develop a strong relationship with Gaz de France.”
The agreements will give GDF an expanded base in North America, according to COO Jean-Marie Dauger.
“As the largest European LNG operator, Gaz de France is consolidating its access to the GOM, thanks to these agreements,” Dauger said. “The group is now present in all the major LNG markets and its fleet — which includes the two largest LNG carriers in the world — enables it to proceed with arbitrages on the final destination of its cargoes. This operation is all the more promising as Cheniere is substantially developing its regasification capacity, thereby offering even better access to the American market.”
The agreements give Cheniere Marketing the option to sell LNG at agreed-upon National Bank of Poland (NBP) index-based prices to GDF Trading, and GDF Trading in turn has the option to sell LNG at agreed New York Mercantile Exchange (Nymex) index-based prices to Cheniere Marketing.
Cheniere Marketing and GDF Trading will be entitled to sell one cargo per month to the other party on an ex-ship basis at the at the Isle of Grain LNG terminal, located in the United Kingdom, and the Cheniere Sabine Pass LNG terminal, which is under construction in Cameron Parish, LA (see Daily GPI, June 16, 2006).
The 15-year agreements begin when either the Sabine Pass LNG receiving terminal begins operations (planned for 2Q2008), or when the first expansion of the Isle of Grain LNG terminal is completed (planned for 4Q2008).
Under a 2008 LNG sales and purchase agreement, GDF Trading will sell up to seven cargoes to Cheniere Marketing at agreed Nymex index-based prices on an ex-ship basis. Cheniere Marketing has granted GDF Trading the right to cancel some cargoes subject to a cancellation fee. In addition, the companies entered into a master ex-ship LNG sales agreement, which sets forth the terms and conditions of the option and LNG sales agreements.
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