Cheniere inks LNG deal with Europe’s Vitol
Cheniere Energy of Houston said Monday that it has agreed to sell liquefied natural gas to the Swiss energy trader Vitol, giving Cheniere another foothold in Europe at a time when the Trump administration is working to reduce the continent’s reliance on gas from Russia.
Vitol represents the second long-term European contract this year for Cheniere, which began exporting LNG processed from the flood of U.S. shale gas in early 2016. Technically, Vitol, which agreed to buy 700,000 metric tons a year from Cheniere, could deliver the gas anywhere in the world, but it maintains substantial operations in Europe. The same is true for Swiss energy trader Trafigura, which agreed to buy 1 million metric tons of LNG a year from Cheniere in another 15-year deal concluded early this year.
Europe has long relied on natural gas piped from Russia and is becoming more reliant on natural gas as it shifts power plants from burning coal. Research firm Wood Mackenzie noted that Europe’s demand for natural gas imports has jumped considerably within the last seven years, and said it expects that rise to continue through 2025 as countries continue to reduce their use of coal and the continent’s existing gas reserves become more costly to develop.
“This leaves Europe with a burgeoning import dependency,” said Murray Douglas, the firm’s research director for European gas. “Gas will continue to benefit from
this more permanent and structural shift in the power market.”
U.S. officials have recently called for domestic LNG producers to ramp up exports to Europe as a counterweight to Russia. Steven Winberg, assistant secretary of fossil energy, warned last week during a hearing before the Senate Energy and Natural Resources Committee that Europe was becoming more dependent on Russian natural gas during a tense period for relations between Russia and the West.
“That does not have to be the case,” he said. “Our nation is endowed with vast supplies of natural gas, and production is growing rapidly.”
The Vitol contract is the latest long-term sales agreement for Cheniere, which has signed similar deals with buyers in Asia and Latin America as it ramps up exports from its facilities on the U.S. Gulf Coast. Vitol’s shipments are expected to begin this year.
Vitol, active in the LNG market since 2005, delivers LNG around the world and maintains gas storage facilities in six European countries.
“We believe that LNG has an important role to play in the future energy mix,” CEO Russell Hardy said in a statement.
The U.S. is quickly becoming a global player in LNG as companies look to build export terminals amid a boom in natural gas production in West Texas, Appalachia and elsewhere. The Federal Energy Regulatory Commission is pushing to expedite its reviews of projects planned for the Gulf Coast and the East Coast.
Most U.S. companies are eyeing Asia in their search for customers. China, South Korea, India and other Asian nations are working to reduce dangerous air pollution levels by shifting from coal to cleaner-burning natural gas, making the continent a key driver in global demand for LNG.
FERC earlier this month issued regulatory schedules for its environmental review of 12 LNG export facilities, including six in Texas. Among them were Freeport LNG’s project in Brazoria County, Sempra Energy’s Port Arthur project and NextDecade LNG’s project in Brownsville.
Cheniere was the first U.S. company to export LNG, operating from its Sabine Pass terminal in Louisiana. The company, which now ships to nearly 30 foreign markets, is expanding that terminal and building a second one in Corpus Christi. Virginia’s Dominion Energy also began exporting LNG from a terminal in Maryland earlier this year.
Other U.S. companies are expected to begin exports next year, including two based in Houston. Freeport LNG is working to open its Gulf Coast terminal at Quintana Island, and Kinder Morgan is completing an export terminal in Georgia.