LNG

Cheniere Energy, owner of the Sabine Pass export plant in Louisiana and the Corpus Christi facility in Texas, has signed a long-term feed-gas supply agreement with US exploration and production company Apache Corp. to underpin its expansion plans at the Texan plant.

The Houston, Texas-based company said its Cheniere Corpus Christi Liquefaction Stage III subsidiary signed an agreement with Apache for 140,000 million British thermal units per day of natural gas for a term of around 15 years.

The Apache feed-gas will come from the Permian Basin, the prolific shale production region in West Texas and southeast New Mexico.

The expected LNG output associated with this gas supply, approximately 0.85 million tonnes per annum, will be marketed by Cheniere to global LNG customers.

Apache will receive an LNG price, net of a fixed liquefaction fee and certain costs incurred by Cheniere, for the natural gas delivered to Corpus Christi Stage III under this agreement.

Cheniere said the LNG price was based on international LNG indices.

The company has already filed an application with the Federal Energy Regulatory Commission to site, construct and operate the Stage III Corpus Christi expansion.

Cheniere’s Stage III development is for up to seven mid-scale liquefaction Trains adjacent to the current Corpus Christi development of three large-scale Trains with output of 13.5 MTPA, with two Trains already completed.

The seven mid-scale Trains will each have nominal capacity of around 1.4 MTPA.

The total expected nominal production capacity of the mid-scale Trains is about 9.5 MTPA of LNG, taking total production at the Texas plant to 23 MTPA.

“This first-of-its-kind long-term agreement with Apache represents a commercial evolution in the US LNG industry, as it will ensure the continued reliable delivery of natural gas to Cheniere from one of the premier producers in the Permian Basin, while enabling Apache to access global LNG pricing and receive flow assurance for its gas,” said Jack Fusco, Cheniere’s President and Chief Executive.

“This commercial agreement, which is expected to support the Corpus Christi Stage III project, reinforces Cheniere’s track record of creating innovative, collaborative solutions to meet customers’ needs and support Cheniere’s growth,” added Fusco.

John J. Christmann, Apache’s CEO and President said Apache’s agreement with Cheniere was part of the company’s long-term strategy to leverage the scale of its Permian assets and diversify its customer base and cost structure.

“We are pleased to partner with Cheniere in this innovative marketing agreement,” added Christmann.

The US shipped a record 11 liquefied natural gas cargoes for a second week as the nation’s three facilities keep up high production while domestic consumption and pipeline exports to Mexico fell amid continued high shale-gas output in the Permian Basin where prices were negative early in the week due to the lack of take-away infrastructure.

Eight cargoes left Cheniere Energy’s Sabine Pass export plant in Louisiana, while two left Cheniere’s Corpus Christi facility in Texas and one departed from Dominion Energy's Cove Point plant in Maryland during the week, according to the US Energy Information Administration.

The total shipped comprised 38.2 billion cubic feet of natural gas with each LNG tanker carrying an average of 3.45 Bcf. Three other carriers, one at each of the plants, were lifting cargoes through May 23.

Three other plants, Cameron LNG in Louisiana, the Elba Island project in Georgia and the Freeport facility in Texas are scheduled to start commercial operations in the next three months.

US consumption of natural gas fell by 3 percent in the past week amid high production in shale areas such as the Permian Basin and pipeline exports to Mexico decreased 4 percent.

Take-away infrastructure for the high Permian volumes is still lacking in hub areas. This was highlighted during the week when Permian area prices went negative.

“Prices at the Waha Hub in West Texas, which is located near Permian Basin production activities, averaged $0.86 per MMBtu on May 23, $1.75/MMBtu lower than Henry Hub prices,” explained the EIA.

The prices through May 22 at the Waha Hub averaged just $0.01 percent per MMBtu after hitting a low of minus-$0.56 per MMBtu, coinciding with two days of planned maintenance on the Northern Natural Gas pipeline.

Domestic natural gas prices declined elsewhere in the week. Henry Hub spot prices remained flat at around $2.61 per million British thermal units.

“Temperatures were warmer than normal east of the Mississippi River and cooler than normal across the rest of the country,” said the EIA report.

At the Chicago Citygate, prices decreased 4 cents to $2.29 per MMBtu and prices at PG&E Citygate in Northern California fell 22 cents to $3.23 per MMBtu.

At the Algonquin Citygate serving the Boston area prices declined 7 cents on the week to $2.25 per MMBtu.

The Transcontinental Pipeline Zone 6 trading point for New York City saw prices decrease by 6 cents to $2.27 per MMBtu.

Tennessee Zone 4 Marcellus shale-gas spot prices were little changed at $2.13 per MMBtu, offering the normal discount to the Henry Hub.

On the storage front, weekly net injections into storage totaled 100 Bcf compared with the five-year (2014-2018) average net injections of 88 Bcf and last year's net injections of 93 Bcf during the same week.

“Working gas stocks totaled 1,753 Bcf, which is 274 Bcf lower than the five-year average and 137 Bcf more than last year at this time,” said the EIA.