U.S. pipeline operator Energy Transfer said on Wednesday it entered into a nonbinding agreement with MidOcean Energy to jointly develop the Lake Charles LNG export facility in Louisiana.
MidOcean will pay for 30% of the construction costs of the facility and receive 30% of the LNG production, or roughly 5.0 million metric tonnes per annum (MTPA). Energy Transfer is the developer and operator of the plant.
The agreement is nonbinding because it depends on Energy Transfer making the final investment decision to go ahead with the plant.
Energy Transfer now has final sales agreements and nonbinding sales agreements for 16 million metric tonnes per annum of the 16.5 million MTPA capacity for the plant.
The agreement should move Energy Transfer closer to making the final decision on the plant.
LNG developers typically use sales and purchase agreements when they make their case to banks to borrow the money they need to develop production facilities.
Lake Charles was the first LNG project impacted by the Biden administration’s refusal to grant an extension to Energy Transfer’s license to export to countries other than those that have free trade agreements with the United States. Former President Joe Biden subsequently declared a moratorium on new export licenses for LNG plants pending an environmental impact study.
Non-FTA licenses are important for LNG project developments because they allow U.S. producers to sell LNG to most importing countries, and not just those that have free trade agreements with the U.S.
The administration of President Donald Trump has issued several non-FTA licenses since it lifted Biden’s moratorium, but has yet to grant an extension or a new license to Energy Transfer.
Under the agreement, MidOcean Energy will have the option to arrange for its own gas supply for its share of LNG production from the plant, and will commit to long-term gas transportation on Energy Transfer pipelines, the companies said.
(Reporting by Vallari Srivastava in Bengaluru Additional reporting by Curtis Williams in Houston Editing by Mohammed Safi Shamsi and Matthew Lewis)