U.S. LNG Developers Seek Higher Delivery Prices as Costs Surge | OilPrice.com
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Breaking News:
Some U.S. LNG exporters are looking to raise their delivery prices in renegotiations of contracts with buyers as rising costs have reduced the profitability of LNG projects in recent years, Reuters reports, citing sources familiar with the plans.
Energy Transfer, which is working to convert its existing Lake Charles LNG import facility in Louisiana into an LNG export facility, has already started renegotiations, company officials said on the Q4 earnings call last month.
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Energy Transfer is renegotiating its sales and purchase agreement (SPAs) from 2019 and 2020, co-chief executive officer Marshal McCrea said.
“We don’t like those prices. So, yes, we are renegotiating those,” McCrea told analysts during the call, referring to the new cost levels and the prices in the 2019-2020 deals.
“We are in negotiations with every one of those. To my knowledge, not one of those has backed out yet. Everybody understands how costs have risen,” the executive added.
Other LNG developers and exporters are also trying to renegotiate contract prices with buyers amid a rise in construction, liquefaction, and labor costs in recent years. These costs have made the new projects more expensive than they were when initial plans were laid out.
Venture Global has been looking to renegotiate higher prices for the supply from its CP2 project in Louisiana, sources told Reuters.
The U.S. LNG developer has yet to take a final investment decision on that plant and construction has not started yet.
Mexico Pacific, whose anchor project is Saguaro Energía LNG on the West Coast of Mexico that would market U.S. natural gas from the Permian to Asia, wants to renegotiate deals with two Chinese buyers, Chinese industry officials told Reuters. The Chinese buyers have so far rejected the proposal to renegotiate prices, according to the sources.
The U.S. remains the world’s largest LNG exporter, but U.S. LNG competitiveness could be hit by the higher costs and potentially lower prices of competing supply that’s indexed to the price of oil, analysts say.
By Tsvetana Paraskova for Oilprice.com
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