Polish Oil and Gas Co., aka PGNiG, has scrapped one deal and signed another with U.S. developer Sempra related to North American liquefied natural gas (LNG) supply.
The memorandum of understanding (MOU) announced Tuesday was signed after PGNiG canceled a previous sale and purchase agreement (SPA) to buy 2 million metric tons/year (mmty) of LNG from Sempra’s planned Port Arthur, TX, export facility.
Under the new nonbinding agreement, Sempra and PGNiG are to work together to transition the Port Arthur SPA to Sempra’s North American LNG portfolio. The companies would also work toward a framework to report, mitigate and reduce greenhouse gas emissions “throughout the LNG value chain” as part of the MOU, PGNiG said.
PGNiG said it had terminated the SPA because of Sempra’s delays to sanction the Port Arthur LNG facility. Sempra had planned to make a final investment decision (FID) this year, but it now is targeting 2022 for sanction.
“The MOU allows for shifting the volumes originally contracted at Port Arthur LNG to other facilities from Sempra LNG’s projects portfolio,” PGNiG CEO Paweł Majewski said.
Sempra’s Cameron LNG facility in Louisiana is in operation. Last month, it said it was focusing on expanding the facility while looking into ways to lower the carbon footprint at Port Arthur. The company’s top priority, however, is advancing the Energía Costa Azul facility in Mexico, which was sanctioned last year and is expected to be operational in 2024.
“We look forward to continuing to work with PGNiG to help meet their energy objectives from our strategically positioned LNG facilities and development projects on the Gulf and Pacific Coasts of North America,” said Sempra LNG CEO Justin Bird.
PGNiG Tuesday also said it has agreements with Venture Global LNG Inc. to purchase 2 mmty from the privately held developer’s Calcasieu Pass and Plaquemines LNG sites in Louisiana. The SPAs would boost PGNiG’s offtake from Venture facilities to 5.5 mmty for 20 years.
The deals come amid greater optimism in the LNG market around long-term offtake contracts as spot prices remain strong. According to NGI data, spot Japan-Korea Marker prices in Asia were in the mid-$14/MMBtu range and the Title Transfer Facility (TTF) benchmark in Europe was above $12 on Monday.
Under the new SPAs, PGNiG would purchase 1.5 mmty from Calcasieu Pass, which is under construction, instead of the previously agreed 1 mmty. Meanwhile, the volumes purchased from Plaquemines LNG, which has yet to reach FID, would increase to 4 mmty from 2.5 mmty. The volumes would be contracted on a free on board basis. Commercial deliveries from Calcasieu Pass to PGNiG are expected to start in early 2023, according to the Polish company.
“LNG plays a vital role in PGNiG’s strategy,” Majewski said. “It is a key component of our supply portfolio diversification and the plan to reinforce the energy security of our customers. Moreover, based on LNG, we plan to develop our commercial activity in the global trading market. Expanding our cooperation with Venture Global LNG fits in with both of these goals.”
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