British utility provider Centrica has inked a 20-year, $5.5 billion deal to buy liquefied natural gas from Cheniere Energy Partners’ Sabine Pass plant in western Louisiana.
Deliveries equivalent to the annual gas demand of roughly 1.8 million homes in the United Kingdom are expected to begin in September 2018, subject to contingencies including U.S. government approval to allow the exports to Britain and Cheniere proceeding with a fifth liquefaction train, as the production units are called.
Centrica, the U.K.’s largest household energy supplier, plans to export gas from the fifth train.
There is an automatic process for U.S. firms to obtain export approval to countries with which the United States has free trade agreements, but because the U.S. has no such agreement with the U.K., Cheniere must go through a potentially more time-consuming permitting process, company spokesman Andrew Ware said.
The partnership, a majority-owned subsidiary of Houston-based Cheniere Energy Inc., has been lining up commercial export deals and regulatory approvals in recent months to bolster its plans to build as many as six liquefaction trains at the plant.
In December, an affiliate of French oil and gas company Total reached a deal to buy liquefied natural gas from the Sabine Pass plant under a $6.3 billion, 20-year contract. Cheniere also has secured commercial agreements with other firms and financing.
The first two liquefaction trains are under construction next to the existing Sabine Pass liquefied natural gas terminal. Contracting and permitting for trains three and four have been completed, though construction has not yet begun.
Cheniere applied last month for Federal Energy Regulatory Commission permits for the fifth train, and also a sixth train, but still must apply for permits from the Energy Department, Ware said. Construction on those units has not yet begun.
Chemical and manufacturing industry leaders are worried that if the Energy Department approves too many export licenses, natural gas prices will soar, jeopardizing $90 billion in planned capital spending. However, a report commissioned by the Energy Department concluded that the U.S. would reap significant economic benefits by exporting more liquefied natural gas.
In a statement distributed by Centrica on Monday, British Prime Minister David Cameron said he welcomes the deal with Cheniere.
“Future gas supplies from the U.S. will help diversify our energy mix and provide British consumers with a new long-term, secure and affordable source of fuel,” Cameron said.
Read ongoing FuelFix coverage of the debate over exporting U.S. fuel:
- Exxon says Dow LNG export plan has problems (March 22)
- Gas export debate heats up over economic benefits (March 15)
- Environmentalists to Obama: Delay decision on gas exports (March 13)
- Exxon exec blasts opponents of gas exports (March 8)
- US shale revolution hinges on exports, execs say (March 6)