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Commonwealth LNG advances supply talks for US export project: S&P

Commonwealth LNG

Commonwealth LNG is advancing talks to secure enough supplies for its proposed liquified natural gas (LNG) export facility. It would be an 8,4 million metric tons per year complex located in Louisiana. If secured, the company would be able to make Final Investment Decision by 2023, said to S&P Paul Varello, CEO.

Firstly, the CEO said that the main reason for the delay in making the FID was the timing of key permits from US regulators. “We’re talking end-users. They’re really waking up to the fact that with the volatility in the market, long-term contracting makes a lot more sense.” Varello underlined.

Moreover, the talks are flowing with end-users in Asia, and Europe, after a dry period caused by the pandemic. However, with economic recovery and natural gas prices peaking, more buyers are reengaging, Varello said.

Indeed, the extreme volatility in gas prices has helped spur greater interest among non-traditional LNG off-takers. In particular, US gas producers are more interested in marketing their output to end-users in Asia and Europe. Consequently, Commonwealth is under advanced talks with LNG producers about how they would export the resource.

In addition, Cheniere Energy, the biggest US LNG exporter, has already signed agreements with several US producers to sell some of their supplies to global markets; according to S&P. Varello commented that the indexes are getting very attractive as strong prices keep US liquefaction capacity at full.

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Commonwealth LNG almost reaches volumes needed for FID

As a result, companies like New Fortress Energy plans to invest more heavily in floating LNG, seeing the storage capabilities as a way for producers to ease the impacts from the “massive shock that global gas markets have been experiencing.” Said CEO Wes Edens.

He also remarked. “You are going to get these 100-year floods happening more than every hundred years,” Edens said, referring to extreme price volatility.

On the other hand, as for Commonwealth LNG, in August, it signed a preliminary agreement with Bangladesh’s Summit Oil & Shipping to potentially contract for up to 1 million mt/year of LNG from its proposed facility. The deal is still under finalization process.

Finally, although Commonwealth has not yet revealed any firm supply deals, Varello said the company is making “substantial progress.” He added that for the company to make FID it needs to secure 7 million mt/year. The contracts that the company has undergoing cover more than half of that target, he concluded.

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