QatarEnergy signs first long-term deal to buy Gulf Coast LNG
Cheniere Energy announced Thursday that it had signed agreements to supply QatarEnergy with up to 4 million metric tons of liquefied natural gas annually through 2054 from the company’s export plants in Louisiana and Texas.
Under the agreements, QatarEnergy will purchase 2 million metric tons of LNG annually from Cheniere’s Sabine Pass facility in Louisiana and another 2 million metric tons from Corpus Christi in Texas, with deliveries anticipated to begin in 2031. Of the Sabine Pass supply, 1 million metric tons annually is contingent on a positive final investment decision for the expansion’s first phase.
The Louisiana Board of Commerce and Industry in September approved a package of incentives for a proposed $6 billion expansion of Cheniere’s Sabine Pass plant that includes $138 million in local property tax breaks under the Industrial Tax Exemption Program. The exemption awaits Gov. Jeff Landry’s approval.
Under the agreement, Cheniere would be exempt from paying about 65% of standard property taxes on the Sabine Pass expansion, owing approximately $10.5 million annually instead of $29.8 million. Those annual figures represent a $19.3 million reduction in property taxes payable to local taxing bodies.
State-backed QatarEnergy is actively seeking alternative supplies for its customers in Asia and Europe after Iranian missiles struck its facilities at Ras Laffan Industrial City in March, knocking out about 17% of its LNG export capacity.
Houston-based Cheniere has annual output of 56 million metric tons, while QatarEnergy has output of up to 64 million metric tons a year. However, QatarEnergy currently has no alternative route to ship the gas it produces other than the Strait of Hormuz, which remains mostly closed to LNG tankers.
“These pivotal, multi-decade agreements with QatarEnergy, one of the world’s most important energy companies and a cornerstone of the global LNG industry, represent a major long-term commercial commitment and reinforce Cheniere’s position as the leader in U.S. LNG,” said Jack Fusco, the company’s chairman, president and chief executive officer. “We look forward to reliably supplying QatarEnergy from both Sabine Pass and Corpus Christi into the second half of this century.”
QatarEnergy estimates the Iranian military strikes sidelined 12.8 million metric tons of annual LNG production capacity for the next three to five years, with estimated annual revenue losses of about $20 billion.
Reuters reports that QatarEnergy is also in advanced talks with Arlington, Virginia-based Venture Global LNG to buy at least 3 million metric tons annually that would be sourced at the company’s terminals in Plaquemines and Cameron parishes in Louisiana. QatarEnergy is also negotiating with Australia-based Woodside Energy to purchase up to 3 million metric tons a year from the company’s LNG export plant now under construction in Calcasieu Parish, Louisiana, according to Reuters.
While the U.S. Henry Hub November natural gas contract settled Monday at $2.55 per million British thermal units, a six-month low, worries around the world over gas supplies heading into winter have recently sent both Europe’s Dutch TTF and Asia’s JKM benchmark prices above $31 per MMBtu.
Eric Smith, associate director of the Tulane Energy Institute, said the agreements with QatarEnergy will have little effect on natural gas prices in Texas and Louisiana.
“They aren’t adding any capacity we didn’t know about,” Smith said. “All of these plants were being expanded already. It’s a vote of confidence that they really believe they can count on the U.S. for baseload LNG capacity, and then if they can ship gas from the Middle East, they will do that, too. It’s more of a shift in emphasis on their part than anything that will have a big impact on U.S. natural gas supply or prices.”
Smith noted that the cost of pipeline transport, cooling gas into liquid form, ocean shipping and converting LNG back into gas at the delivery point add approximately $10 per MMBtu in delivery costs.
QatarEnergy and project partner ExxonMobil are currently developing the $10 billion Golden Pass LNG export terminal in Sabine Pass in southeast Texas, which began exports in April. The companies expect to ramp up LNG production at the plant to 18 million metric tons a year by the end of 2027.
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