Chesapeake Energy Corp. has signed tripartite agreements for the supply of liquefied natural gas (LNG) from Delfin LNG LLC, which the former has committed to sell to Singapore.
The suite of deals, which also involves Gunvor Group Ltd., includes an agreement for Chesapeake to supply the offtake volume from the Louisiana project of Delfin LNG, a company of Delfin Midstream Inc., to Gunvor Singapore Pte. Ltd.
“Under the SPA [sale and purchase agreement], Chesapeake will purchase approximately 0.5 million tonnes of LNG per annum from Delfin at a Henry Hub price and contract targeted start date in 2028 then deliver to Gunvor on an FOB [free on board] basis with the sales price linked to the Japan Korea Marker for a period of 20 years”, Oklahoma City-based oil and gas producer Chesapeake said in a news release Tuesday. “These volumes will represent 0.5 mtpa [million metric tons per annum] of the previously announced up to 2 mtpa HOA [heads of agreement] with Gunvor”.
Chesapeake will source the LNG committed to Gunvor from a United States facility, according to a Cheseapeake press release March 6 announcing the HOA.
Delfin LNG is a deepwater port for LNG export proposed to rise near the Gulf of Mexico. It is planned to have four floating LNG vessels with a combined capacity of 13.3 million metric tons per annum (MMtpa).
Delfin LNG and Gunvor Singapore earlier signed an agreement for the former to supply the Gunvor subsidiary 0.5 MMtpa to 1.0 MMtpa free on board over 15 years, as announced by Houston, Texas-based Delfin Midstream November 27.
While the Biden administration recently said it has paused pending decisions on LNG export to countries with no free trade agreement (FTA) with the U.S., Delfin LNG years ago secured a permit from the Department of Energy (DOE) for non-FTA export. The U.S. and Singapore, though, are free trade partners.
In Tuesday’s announcement, Delfin Midstream chief executive Dudley Poston said, “We believe our unique liquefaction solution provides Chesapeake with commercial flexibility with a reduced environmental footprint, while providing a much-needed source of additional supply to key U.S. allies and the global LNG market”.
Chesapeake president and chief executive Nick Dell'Osso said, "Today's announcement cements an important step on our path to 'Be LNG Ready' and is further recognition of the depth of our portfolio and strength of our financial position”.
Kalpesh Patel, co-head of LNG trading and a member of the executive committee of Gunvor, said, "This deal represents an important step in finalizing the 0.5 mtpa out of our total of 2.0 mtpa arrangement with Chesapeake, while expanding our existing cooperation with Delfin”.
The announcement comes on the heels of a move by President Joe Biden to bar the DOE from issuing permits for LNG export to nations with no FTA with the U.S., announced January 6. However, the U.S. and Singapore are free trade partners, their FTA in force since 2004 according to the Office of the U.S. Trade Representative.
The moratorium gives the DOE time to review permitting considerations that are now out of date when it comes to considerations on greenhouse gas emissions, environmental impact, energy prices and domestic gas supply, the White House had said.
“The current economic and environmental analyses DOE uses to underpin its LNG export authorizations are roughly five years old and no longer adequately account for considerations like potential energy cost increases for American consumers and manufacturers beyond current authorizations or the latest assessment of the impact of greenhouse gas emissions”, it said in a statement January 26.
The White House emphasized the pause does not impact LNG commitments to allies “in the near-term” and that the U.S. still can export LNG during “unanticipated and immediate national security emergencies”.
“Through existing LNG production and export infrastructure, the U.S. has – and will continue – to deliver for our allies”, the statement said.
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