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US LNG sale and purchase agreements increased in 2022

Published by , Editorial Assistant
Hydrocarbon Engineering,

In 2022, US LNG suppliers of projects under development entered into contracts with buyers for about 6.0 billion ft3d of LNG, according to data from the Department of Energy (DOE) and from company websites. These contracts, referred to as sale and purchase agreements (SPA), are agreements for the sale and purchase of a firm quantity of LNG over a fixed period of time, usually 10 years or longer, that stipulate the terms and conditions of the transfer between seller and buyer. The newly contracted LNG volumes will be exported from eight prospective projects — two that are under construction, four that have received regulatory approval, and two that are proposed.

The projects, by phase of development, are:

  • Under construction: Corpus Christi Stage 3 and Plaquemines.
  • Approved: Delfin, Lake Charles LNG, Port Arthur Phase 1, and Rio Grande LNG.
  • Proposed: CP2 and Commonwealth LNG.

Almost three-quarters (74%) of the SPAs signed with prospective projects last year are for 20-year terms that begin when the project starts commercial operations; the earliest start date would be 2024. Almost all of the agreements (92%) are for LNG cargoes to be sold on a free-on-board (FOB) basis, which means the buyer pays for and receives the LNG at the loading terminal. Destination flexibility is a common feature of most of the agreements, where the buyer can deliver the LNG to any destination as long as it complies with DOE export authorisations and US law.

Although much of the contracting activity for the prospective projects occurred in 2022, Plaquemines and Rio Grande LNG entered into SPAs prior to 2022. When agreements signed before and during 2022 are included for these two projects, buyers have committed to about 90% of the Plaquemines LNG production and to about 34% of Rio Grande LNG’s production. Three other projects have approximately 50% or more of their production committed to buyers — Corpus Christi Stage 3 (60%), Lake Charles LNG (48%), and Port Arthur Phase 1 (71%).

Companies in Asia (which we expect will deliver LNG cargoes to Asia) committed to purchase 1.8 billion ft3/d of the volumes contracted with these prospective LNG projects in 2022. Companies in Europe (which we expect will deliver LNG cargoes to Europe) committed to purchase 1.2 billion ft3/d, and companies with trading affiliates (which we expect will deliver LNG cargoes to multiple destinations) committed to purchase 3.0 billion ft3/d.

Concern about future natural gas supplies, particularly in Europe, grew following Russia’s full-scale invasion of Ukraine in February 2022 and contributed to the increase in contracting with new LNG projects in the US. Europe increased its LNG imports by 66% (5.9 billion ft3/d) in 2022 compared with 2021, according to data from Cedigaz, which was the result of reduced natural gas deliveries by pipeline from Russia and record-high natural gas prices at trading hubs in Europe. By expanding its LNG import capacity, Europe will be able to receive 34% more LNG in 2024 compared with 2021.

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