Cheniere Energy and EDF Sign Latest Natural Gas Deal

Cheniere Energy, a US liquefied natural gas (LNG) exporter, announced a deal to sell as many as 24 cargoes to French energy company EDF. The deal is valid starting in 2017 through 2018.

Per the deal, the sales price of the shipments will be contingent to the Title Transfer Facility (TTF) in the Netherlands. This is continental Europe’s largest and most liquid gas trading point.

However, a source within the gas industry has indicated that Cheniere Energy kept cancellation options as part of the deal with EDF. This could mean the company could get out of supply commitments.

A definite number concerning the amount of cargoes committed to EDF could not be established. Some sources believed only a few were to arrive at EDF’s newly constructed import terminal at Dunkirk in France.

At this point in time, Cheniere already possesses a large amount of spare LNG export capacity. The company now is looking for secondary options on where to place cargo from its first LNG export plant due to launch sometime in December.

In the past, Asia and the Middle East have been the preferred market for LNG volumes. Here, buyers paid premiums as demand rose. However, the slowing growth in China and falling gas demand in Japan and South Korea, in addition to the new supply from Australia and the US, has reduced prices and created greater competition for market share.

Producers are frantic to get commitments from buyers and establish fall-back positions where extra supply and gas reserves can be offloaded in the event that demand and gas consumption falls rapidly.

This deal adds on to past deals between Cheniere and EDF. In August, Cheniere agreed to sell EDF 26 cargoes through 2018.

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