BP takes on 20-year LNG export contract

BP has signed a 20-year agreement to ship liquefied natural gas processed at a terminal in Freeport, Texas, which is the first of several facilities awaiting federal approvals for natural gas exports, a Freeport LNG executive said Monday.

The agreement would commit BP to pay for processing of 4.4 million tons of LNG per year at the Freeport LNG facility, where it would be loaded onto BP tankers and shipped abroad,  Freeport LNG CEO Michael Smith told FuelFix.

“I think it sends a very strong message that a super major made this commitment,” Smith said. “It makes sense to export gas and they want to be in one of the first facilities of its kind to be able to export gas.”

BP marks the third company to sign an agreement to buy LNG exported from the facility, with two Japanese companies, Osaka Gas and Chubu Electric Power, contracting another 4.4 million tons of LNG per year from the facility.

The construction and shipping of natural gas from the Freeport site is subject to regulatory approvals, including permits that would allow for the export of LNG to countries that do not have free trade agreements with the United States, Smith said.

“BP is very pleased to have the opportunity to work with Freeport LNG, Chubu Electric and Osaka Gas on U.S. Gulf Coast LNG exports,” said Paul Reed, who heads BP’s integrated supply and trading division, in a statement. “We believe that this is an attractive value proposition and a complementary position to BP’s existing portfolio of equity and 3rd party LNG contracts. We look forward to serving our LNG customers with even more flexibility from our portfolio of natural gas.”

The Freeport LNG facility opened in 2008 as a regasification site for LNG imported from overseas. That was about the same time that natural gas production in the United States began a boom that sent natural gas prices last year to their lowest levels in a decade.

Since then Freeport LNG and other companies have been attempting to find ways to export cheap American natural gas.

Freeport LNG is “next in line” to receive approval from the U.S. Department of Energy to broadly export natural gas, the company said.

The department is expected to review Freeport LNG’s export permit application after Feb. 25, the company said.

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Read ongoing FuelFix coverage of the debate over exporting U.S. fuel:

Energy exports boosting US trade position (Feb. 10)
Gas exports won’t hurt US edge, expert says (Feb. 7)
Lawmakers propose making LNG exports automatic (Feb. 1)
Shell, El Paso plan LNG export facility (Jan. 28)
US will cap LNG shipments to boost economy (Jan. 25)
Dow Chemical disavows Texas LNG export project it co-owns (Jan. 25)
Lawmakers urge exports of US natural gas (Jan. 24)
Dow Chemical fights ally Exxon’s natural gas export push (Jan. 24)
Oil industry battles back on natural gas exports (Jan. 17)
Global refining boom could challenge U.S. exports (Jan. 17)