bp Expands LNG Portfolio with New Woodfibre SPA

Tuesday, 12 September 2023
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Canadian LNG export prospects gained further support through bp’s third long-term Sales and Purchase Agreement (SPA) to trade LNG from Woodfibre LNG in British Columbia. Like other competitors, bp has sought to bolster its flexible supply portfolio in the Pacific, aiming to reach 30mtpa by 2030. LNG demand in the Pacific has returned to growth after a dip in 2022 with the majority stemming from China.

bp has signed its third long-term contract to purchase LNG from the Woodfibre LNG facility in British Columbia, Canada. This agreement commits the conglomerate to buying 0.45 million tonnes of LNG per year (mtpa) for 15 years on a free on board (FOB) basis. With this deal, all LNG production from the Woodfibre LNG export facility has now been reserved for bp. This encompasses a firm offtake of 1.95mtpa, with the remaining portion available on a flexible offtake basis.

lng market tracker sept 12 2023

Expanding portfolio

In its pursuit of opportunities within the gas value chain, bp views LNG as a crucial component of the energy transition and its own transformation into an integrated energy company. As part of its goal to build an LNG supply portfolio of 30mtpa by 2030, this additional supply source on the Canadian west coast expands bp's LNG reach. It strengthens the company's ability to meet the growing global demand for natural gas.

In addition to securing the rights to purchase LNG from the Woodfibre LNG project, bp will also ensure the safe and reliable transportation of gas to the Woodfibre LNG export facility throughout the 15-year contract term.

Demand growth

Overall, LNG demand in the Pacific has returned to growth after a dip in 2022. Regional offtakes in 1H 2023 were up by 2.48mmt (2pct) from 122.99mmt in 1H 2022 to 125.46mmt in 1H 2023. China has been a key driver of this increase, accounting for 3.38mmt (11pct) alone. However, Pacific demand growth has been tempered by a significant decrease in Japan of 4.73mmt (-13pct). 

Canadian prospects

As we have reported in July, Canadian LNG proposals have historically been plentiful. Over the past decade, a plethora of LNG projects have been proposed for Canada’s Pacific coast, all targeting Asian markets, to diversify its gas export economy. To date, Canada has no operational LNG export terminal whilst its only significant foreign customer for natural gas — the United States — has developed its own gas resources and ascended as a major LNG exporter.  As such, only two projects with serious prospects and significant development progress remain on the Pacific coast in 2023 – Woodfibre LNG and LNG Canada. The bulk of capacity at the two LNG project appears to have been folded into the respective supply portfolios of Shell, Petronas, PetroChina and BP.

Jonathan Shepard, VP of global LNG trading and origination at bp, expressed optimism about this collaboration, stating, "As the world seeks secure, affordable, and lower carbon energy, global demand for LNG is expected to continue to grow, and this additional Canadian supply source will further enhance bp's position in the Pacific region. We look forward to continuing our close collaboration with Woodfibre LNG."

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