Qatar, Exxon Mobil in deal on US LNG export terminal

Bloomberg/Chicago

Exxon Mobil Corporation, the largest energy company by market value, has signed an agreement with Qatar Petroleum International (QPI) outlining a plan for construction of a $10bn natural gas export terminal in Texas.

The project will involve installing liquefaction equipment at an existing import facility in Sabine Pass, Texas, according to an e-mailed statement yesterday from Golden Pass Products, a subsidiary formed by the two companies.

It won permission last year to export the fuel to nations with free-trade agreements with the US and is awaiting approval to send the fuel to all other countries.

Exxon, based in Irving, Texas, and state-owned Qatar Petroleum plan to ship as much as 15.6mn metric tonnes of gas annually from the Golden Pass facility, according to the statement.

A boom in US production has spurred several proposals to export the fuel, which is cooled to liquid form at -260° F (-162° C) to reduce volume and allow for transportation by ship.

“This agreement sets out a highly competitive commercial blueprint for Golden Pass Products, with a commitment that builds on the unique combined strengths of QPI and Exxon Mobil through the global downstream LNG value chain,” Bill Collins, president of Golden Pass, said in the statement.

A final investment decision will be made after the project receives government approvals, and will be based on a range of factors, the company has said.

Exxon has been expanding its worldwide gas portfolio with acquisitions such as the 2010 purchase of XTO Energy in the US and investments in projects that include the A$52bn ($52bn) Gorgon LNG complex in Australia. Gas accounted for half of Exxon’s global production during the first three months of this year.

US liquefied natural gas import facilities have been operating below capacity as a glut of domestic gas from shale formations erased demand for foreign supplies. The import terminal at Golden Pass began operations in 2010.

Meanwhile, Exxon Mobil and Qatar Petroleum have  announced an agreement to ship LNG to Britain from their proposed export plant in the US, offering another supply stream to the island nation as domestic output dwindles, adds Reuters.

Under the deal, the companies would send up to 15.6mn tonnes of LNG each year to their South Hook terminal in Wales from the Golden Pass plant, pending US government approval to build the plant and export LNG.

The announcement comes at the end of a torrid winter in Britain which saw natural gas stocks fall to dangerously low levels, causing major price spikes and calls for a more robust supply system.

Britain has a number of LNG import terminals, but a lack of firm, long-term supply deals makes it vulnerable to sudden shortages when shippers in the Middle East divert cargoes to higher paying markets in Asia, especially in winter.

The South Hook terminal was underused during winter despite higher demand.