OREANDA-NEWS. January 11, 2017.  The mid-scale Texas LNG export project near Brownsville, Texas, has reached preliminary deals with Asian customers that could allow construction of at least one liquefaction train, it said today.

The non-binding 20-year agreements are with unnamed state-owned and private LNG buyers in southeast Asia and China for a combined volume of 3.1mn t/yr, equivalent to about 426mn cf (12mn m?/d) of gas.

Texas LNG plans to make a final investment decision in 2018 and come on line in 2021 or 2022 with one 2mn t/yr liquefaction train, so it has oversubscribed phase 1 on a preliminary basis. It plans to build up to two trains with total capacity of 4mn t/yr. It is now marketing phase 2 and is confident it will sell all its planned capacity, it said.

The project said last year that it planned to start construction in late 2017 and come on line in 2020.

Texas LNG will need to finalize binding long-term deals for each train to get bank financing for construction. Low oil prices have made it difficult for multi-billion-dollar US LNG export projects to sign binding customer contracts, as the economics of US exports are based on a wide differential between domestic gas prices and global prices. Most long-term Asian LNG contracts are linked to oil prices.

Texas LNG is negotiating with the potential customers to convert the preliminary deals to binding liquefaction capacity or offtake contracts, or a combination of the two. Under capacity deals, customers would only pay for liquefaction and procure their own gas and pipeline transportation. Under offtake agreements, customers would pay Texas LNG to procure gas and pipeline capacity, in addition to buying liquefaction services.

Texas LNG believes that its relatively small size gives it an advantage over significantly larger proposed US projects. A number of the world's larger LNG buyers have already procured US liquefaction capacity, so many US projects are now targeting smaller buyers with lower demand and potentially weaker credit.

"Despite a very challenging global environment, Texas LNG has demonstrated that its realistic size, ideal location, focus on low cost, and transparency have attracted LNG buyers," Texas LNG chief executive Vivek Chandra said. "Buyers realize the value of procuring LNG directly from the producing source, rather than via intermediaries or portfolio players."

Texas LNG plans to charge a liquefaction fee of \\$2.80/mmBtu, significantly lower than contracts for \\$3.50/mmBtu that Cheniere Energy secured for the LNG export terminal it is building in Corpus Christi, Texas.

A proposed pipeline that would bring Eagle Ford shale gas to Mexico could also serve Texas LNG and other proposed LNG projects near Brownsville.

The US Department of Energy (DOE) has authorized Texas LNG to export up to 4mn t/yr to countries that have free trade agreements (FTAs) with the US, and the agency will consider an application to export the same volume to non-FTA nations if the US Federal Environmental Regulatory Commission issues environmental clearance.