Trafigura Calls for a Rethink of LNG Project Funding

The current financing model for most LNG export projects, where banks require a large part of the future volumes to be contracted in advance in long-term deals, needs to change, according to Richard Holtum, chief executive at major commodity trader Trafigura.

Currently, projects in the Americas, for example, need to show the banks that 80-90% of their future annual supply is already locked in long-term contracts with buyers.

“I feel sorry for LNG projects in the US,” Holtum said on a panel at the LNG2026 conference in Doha, Qatar, as carried by Bloomberg.

“They would only get bank financing when they show that they’ve sold 80%-90% of their volume on long-term projects,” the executive added.

Several projects in the United States are currently busy negotiating offtake agreements to be able to tap billions of U.S. dollars of funding.

The developers of Commonwealth LNG near Cameron, Louisiana, this week signed an offtake deal with commodity trader Mercuria, bringing the total secured long-term, binding offtake agreements to 7 of the facility’s 9.5 Mtpa permitted capacity. However, final negotiations are underway for the facility’s remaining capacity, it said on Tuesday.

But at the end of last year, Energy Transfer dropped plans to build an LNG plant in Louisiana to focus on natural gas pipelines, which are a more lucrative business.

Energy Transfer had struck several offtake deals for future supply from Lake Charles, including with Chevron, which had committed to 3 million tons of LNG from the facility, and Japan’s Kyushu Electric Power Company, for 1 million tons of LNG.

However, Energy Transfer needed more partners to share the financial load with, as noted during its third-quarter earnings call. At the time, Energy Transfer said it was looking for buyers for up to 80% of the project’s equity before the final investment decision was made.

According to Trafigura’s Holtum, the LNG industry has not seen a funding approach similar to the oil projects, where banks lend money more easily as they take a long-term view of where oil prices will be in the long term.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com