Louisiana’s SCT&E LNG signs Asian supply deal

OREANDA-NEWS. April 06, 2016. Southern California Telephone & Energy LNG (SCT&E LNG) has signed a fourth non-binding deal for its planned LNG export project in Louisiana.

The memorandum of understanding (MOU) was reached with "a reputable Asian energy company" that owns and operates an LNG import terminal and plans to build more terminals, SCT&E LNG said, without elaborating. The potential multi-billion-dollar deal is for offtake of 2mn t/yr, equivalent to about 256mn cf/d (7.2mn m?/d) of gas.

The potential customer has the option of acquiring equity in the export project on Monkey Island, along the east side of the Calcasieu ship channel in Cameron parish, Louisiana.

The \\$9.3bn, 12mn t/yr project is scheduled to come on line in 2022. SCT&E LNG is a subsidiary of Temecula, California-based wireless communications and energy company SCT&E.

The four deals are for combined offtake of 4.7mn t/yr, but SCT&E LNG will have to finalize enough deals to finance construction. SCT&E is offering to sell just liquefaction capacity or a fixed price for LNG.

"SCT&E LNG now has over one-third of the facility's overall capacity reserved via MOUs," SCT&E chairman Greg Michaels said. "We have seen an increase in commercial activities from clients looking to secure LNG supply beginning in 2022, and it is great to see LNG buyers confirm our business decisions and market timing."

Falling oil prices have made it significantly more difficult for US LNG developers to finalize long-term deals with customers, but SCT&E LNG has said it is confident it will move forward, partly because oil prices will fluctuate significantly over 20-year agreements. The economics of US LNG exports are based on a wide differential between domestic gas prices and global oil prices, as most long-term LNG contracts to Asia are linked to oil prices.

SCT&E LNG has been authorized to export up to 12mn t/yr to nations that have a free trade agreement (FTA) with the US and has said it could move forward with just an FTA license because it likely could market 4mn t/yr to FTA nations. It has also applied to export up to 12mn t/yr to non-FTA nations, but the US Department of Energy will only consider that application if the US Federal Energy Regulatory Commission grants environmental approval to the project.