Cheniere and Galp Sign Long-Term LNG Sale and Purchase Agreement

Rhea-AI Summary

Cheniere Energy (NYSE: LNG) has announced a significant long-term LNG sale and purchase agreement (SPA) with Galp Trading S.A., a subsidiary of Galp Energia. Under the 20-year agreement, Galp will purchase approximately 0.5 million tonnes per annum of LNG from Cheniere Marketing on a free-on-board basis. The purchase price will be indexed to the Henry Hub price, plus a fixed liquefaction fee.

Deliveries are expected to start in the early 2030s, subject to a positive Final Investment Decision on Train Eight of the Sabine Pass Liquefaction Expansion Project. This agreement supports Cheniere's SPL Expansion Project, which aims to develop up to 20 mtpa of LNG capacity. The deal underscores the growing importance of US natural gas in Europe's long-term energy strategy.

Positive

• Secured a 20-year LNG sale and purchase agreement with Galp
• Agreement for 0.5 million tonnes per annum of LNG
• Purchase price indexed to Henry Hub plus fixed liquefaction fee
• SPA provides support for the SPL Expansion Project
• Potential for up to 20 mtpa of LNG capacity in the expansion project

Negative

• Deliveries subject to positive Final Investment Decision on Train Eight
• Long lead time with deliveries expected to commence in early 2030s

Insights

Energy Industry Analyst

Cheniere's new 20-year LNG supply agreement with Galp is a significant development for both companies and the broader LNG market. The deal for 0.5 million tonnes per annum reinforces Cheniere's position as a leading LNG exporter and Galp's commitment to securing long-term gas supplies.

This agreement is strategically important for Cheniere as it provides additional support for the Sabine Pass Liquefaction Expansion Project. The long-term nature of the contract offers revenue stability and helps justify the substantial capital investment required for Train Eight.

For investors, this deal signals strong demand for US LNG in Europe, potentially leading to increased shareholder value. However, the agreement is contingent on a positive Final Investment Decision for Train Eight, which introduces some uncertainty.

Financial Analyst

This LNG sale and purchase agreement (SPA) represents a positive financial outlook for Cheniere. The 20-year contract duration provides long-term revenue visibility, which is important for capital-intensive LNG projects. The pricing structure, indexed to Henry Hub plus a fixed liquefaction fee, offers a stable margin for Cheniere, protecting against natural gas price volatility.

Investors should note that while this agreement strengthens the case for the SPL Expansion Project, it doesn't guarantee its approval. The Final Investment Decision will depend on securing additional contracts and favorable market conditions. The inclusion of early cargoes before Train Eight's start is a positive cash flow factor to consider.

Overall, this deal enhances Cheniere's long-term financial stability and growth prospects, potentially leading to improved shareholder returns.

Geopolitical Energy Analyst

This agreement between Cheniere and Galp underscores the growing importance of US LNG in Europe's energy security strategy. As Europe seeks to diversify its gas supplies away from Russian sources, long-term contracts with US suppliers are becoming increasingly attractive.

The deal's timing, extending into the 2050s, indicates a long-term commitment to natural gas in Europe's energy mix, despite the push for renewables. This suggests that LNG is viewed as a important transition fuel in the continent's decarbonization efforts.

For investors, this trend points to sustained demand for US LNG exports, potentially supporting higher valuations for companies like Cheniere. However, it's important to monitor EU climate policies and technological advancements in renewable energy, which could impact long-term LNG demand.

HOUSTON--(BUSINESS WIRE)-- Cheniere Energy, Inc. (“Cheniere” or the “Company”) (NYSE: LNG) announced today that its subsidiary Cheniere Marketing, LLC (“Cheniere Marketing”), entered into a long-term liquefied natural gas (“LNG”) sale and purchase agreement (“SPA”) with Galp Trading S.A. (“Galp”), a subsidiary of Galp Energia, SGPS, S.A. (“Galp Energia”).

Under the SPA, Galp has agreed to purchase approximately 0.5 million tonnes per annum (“mtpa”) of LNG for 20 years from Cheniere Marketing on a free-on-board basis for a purchase price indexed to the Henry Hub price, plus a fixed liquefaction fee. Deliveries are expected to commence in the early 2030s and are subject to, among other things, a positive Final Investment Decision with respect to the second train (“Train Eight”) of the Sabine Pass Liquefaction Expansion Project (“SPL Expansion Project”). The SPA includes a limited number of early cargoes to be purchased by Galp prior to the start of Train Eight.

“We are pleased to enter into this long-term agreement with Galp, a leader across Iberia’s energy sector, which reinforces the critical role US natural gas is expected to play in Europe’s energy mix into the second half of this century,” said Jack Fusco, Cheniere’s President and Chief Executive Officer. “We look forward to providing our flexible, reliable and cleaner burning LNG to Galp under this new long-term agreement. This SPA is expected to provide further support for the SPL Expansion Project, and demonstrates continued momentum as we progress development of the project.”

The SPL Expansion Project

The SPL Expansion Project is being developed for up to approximately 20 mtpa of LNG capacity, inclusive of estimated debottlenecking opportunities. In February 2024, certain subsidiaries of Cheniere Energy Partners, L.P. (NYSE: CQP) submitted an application to the Federal Energy Regulatory Commission for authorization to site, construct and operate the SPL Expansion Project, as well as an application to the Department of Energy requesting authorization to export LNG to Free-Trade Agreement (“FTA”) and non-FTA countries.

About Cheniere

Cheniere Energy, Inc. is the leading producer and exporter of LNG in the United States, reliably providing a clean, secure, and affordable solution to the growing global need for natural gas. Cheniere is a full-service LNG provider, with capabilities that include gas procurement and transportation, liquefaction, vessel chartering, and LNG delivery. Cheniere has one of the largest liquefaction platforms in the world, consisting of the Sabine Pass and Corpus Christi liquefaction facilities on the U.S. Gulf Coast, with total production capacity of approximately 45 mtpa of LNG in operation and an additional 10+ mtpa of expected production capacity under construction. Cheniere is also pursuing liquefaction expansion opportunities and other projects along the LNG value chain. Cheniere is headquartered in Houston, Texas, and has additional offices in London, Singapore, Beijing, Tokyo, and Washington, D.C.

For additional information, please refer to the Cheniere website at www.cheniere.com and Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the Securities and Exchange Commission.

About Galp Energia

Galp Energia is a Portuguese multinational integrated energy corporation, headquartered in Lisbon, Portugal. Galp Energia is engaged in every aspect of the oil and natural gas supply, from exploration and production; refining, trading, logistics and retailing and developing renewable energy solutions such as advanced biofuels, renewable hydrogen and renewable power generation.

Forward-Looking Statements

This press release contains certain statements that may include “forward-looking statements” within the meanings of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical or present facts or conditions, included herein are “forward-looking statements.” Included among “forward-looking statements” are, among other things, (i) statements regarding Cheniere’s financial and operational guidance, business strategy, plans and objectives, including the development, construction and operation of liquefaction facilities, (ii) statements regarding regulatory authorization and approval expectations, (iii) statements expressing beliefs and expectations regarding the development of Cheniere’s LNG terminal and pipeline businesses, including liquefaction facilities, (iv) statements regarding the business operations and prospects of third-parties, (v) statements regarding potential financing arrangements, (vi) statements regarding future discussions and entry into contracts, (vii) statements relating to Cheniere’s capital deployment, including intent, ability, extent, and timing of capital expenditures, debt repayment, dividends, share repurchases and execution on the capital allocation plan, and (viii) statements relating to our goals, commitments and strategies in relation to environmental matters. Although Cheniere believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Cheniere’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in Cheniere’s periodic reports that are filed with and available from the Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required under the securities laws, Cheniere does not assume a duty to update these forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801076283/en/

Cheniere Energy, Inc.



Investors

Randy Bhatia, 713-375-5479

Frances Smith, 713-375-5753



Media Relations

Eben Burnham-Snyder, 713-375-5764

Bernardo Fallas, 713-375-5593

Source: Cheniere Energy Partners, L.P. and Cheniere Energy, Inc.

FAQ

What is the duration and volume of the LNG agreement between Cheniere and Galp?

Cheniere and Galp have signed a 20-year agreement for approximately 0.5 million tonnes per annum of LNG.

When are LNG deliveries expected to begin under the Cheniere-Galp agreement?

Deliveries are expected to commence in the early 2030s, subject to a positive Final Investment Decision on Train Eight of the Sabine Pass Liquefaction Expansion Project.

What is the pricing structure for the LNG in the Cheniere-Galp agreement?

The purchase price is indexed to the Henry Hub price, plus a fixed liquefaction fee.

What is the potential capacity of Cheniere's SPL Expansion Project?

The SPL Expansion Project is being developed for up to approximately 20 mtpa of LNG capacity, including estimated debottlenecking opportunities.