Delfin Midstream Inc. has reached a tentative deal to supply 1 million metric tons/year (mmty) of LNG from its proposed floating offshore production facility in the Gulf of Mexico to UK utility Centrica plc as Europe continues efforts to secure more energy. 

Delfin

The non-binding heads-of-agreement covers liquefied natural gas deliveries on a free-on-board basis for a 15-year period. It follows a sales and purchase agreement Delfin announced last month with trading house Vitol Inc. to supply 0.5 mmty from the project. Vitol would also take an equity stake in the company under that deal.

Delfin CEO Dudley Poston said “market demand for long-term LNG continues to be strong and buying activity from Europe and other geographies has accelerated over the past few months.” The Delfin floating LNG (FLNG) project would consist of four vessels offshore Louisiana. With a nameplate capacity of 3.5 mmty each, management has said it can sanction the vessels individually.

The company is still targeting a final investment decisionon the first vessel by the end of this year, which would put operations on track to start in 2026. If built, Delfin would be the first FLNG export terminal in the United States. 

Diversifying Supplies

Centrica valued the deal at $8.5 billion. The company provides natural gas and electricity to 10 million households in the UK and Ireland. While the UK doesn’t rely heavily on Russian gas supplies, it has been working to solidify its energy supplies as Europe makes a broader pivot away from the pariah state following its February invasion of Ukraine. 

“Additional U.S. gas export capacity will help increase UK, European and global energy security, reflecting the increasing importance of LNG in the global gas supply chain,” said Centrica CEO Chris O’Shea.

Centrica also signed a deal with Equinor SA in June to boost gas supplies it receives from Norway under an existing bilateral contract. 

“From renewables to nuclear, we have ambitious plans for greater energy independence, but we are also realistic about our energy needs now and in the years ahead,” said the UK’s Kwasi Kwarteng, secretary of state for business and energy. “That means we need to secure more diverse and reliable sources of natural gas from friends, allies and strategic partners.”

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The Delfin project has been in the works for years, but it was slowed down by the regulatory process, a downturn in the global gas market and the Covid-19 pandemic. 

The company has capitalized on a shift among global buyers looking to insulate themselves from supply shortages and high spot prices. So far this year, U.S. LNG producers have signed more than 20 long-term agreements to supply over 29 mmty of LNG.

Most of those deals were signed by Asian buyers, portfolio players and trading houses. If finalized, Centrica would become the second European utility to secure long-term LNG supplies this year. France’s Engie SA agreed in May to purchase 1.75 mmty from NextDecade Corp.’s proposed Rio Grande LNG project in South Texas.

Delfin is also in the early stages of developing the Avocet FLNG project, which would add additional vessels in the area of its current project offshore Louisiana.