U.S.-based Cheniere Energy Inc. (AMEX: LNG) said Sept. 17 that it has signed a 15-year agreement to supply LNG to the world's largest oil trader Vitol Group that has been steadily ramping up its presence in that market.
The move by Vitol is part of a long-term objective shared by many major commodity traders to increase their traded gas volumes as emerging markets seek cleaner fuels for power generation.
China, in particular, has soaked up what many analysts expected to be a significant LNG glut this year as it replaces some of its coal furnaces with gas-fueled ones.
Part of the drive for traders is that the LNG market is becoming increasingly liquid with more spot deals, presenting arbitrage opportunities and supply imbalances that traders thrive off.
Cheniere said it will sell 700,000 tonnes of LNG per year to Vitol, starting in 2018 with a purchase price pegged to the Henry Hub monthly average, plus a fee.
On Sept. 17, Vitol's CEO Russell Hardy told a conference in Barcelona that he expected global LNG traded volumes, currently at 300 million tonnes, to double in the coming years, as new importing countries build facilities.
Last year, Vitol's LNG traded volumes tripled to 7.4 million tonnes up from 2.6 million tonnes in 2016.
The U.S. has become a major LNG exporter in the last two years, mostly due to the ramp-up of Cheniere's Sabine Pass terminal in Louisiana. Houston-based Cheniere is also building the Corpus Christi terminal in Texas.
Earlier this year, Cheniere signed a similar agreement with rival Trafigura, a major Swiss-based commodities trader, for 1 million tonnes.
RELATED: Trafigura Boosts US LNG Footprint With Freeport Deal
Along with long-term supply deals, Vitol has been competing to build LNG import infrastructure in Southeast Asia, pitting itself against Gunvor and Trafigura in Pakistan and Bangladesh.
Recommended Reading
Defeating the ‘Four Horsemen’ of Flow Assurance
2024-04-18 - Service companies combine processes and techniques to mitigate the impact of paraffin, asphaltenes, hydrates and scale on production—and keep the cash flowing.
AVEVA: Immersive Tech, Augmented Reality and What’s New in the Cloud
2024-04-15 - Rob McGreevy, AVEVA’s chief product officer, talks about technology advancements that give employees on the job training without any of the risks.
Lift-off: How AI is Boosting Field and Employee Productivity
2024-04-12 - From data extraction to well optimization, the oil and gas industry embraces AI.
AI Poised to Break Out of its Oilfield Niche
2024-04-11 - At the AI in Oil & Gas Conference in Houston, experts talked up the benefits artificial intelligence can provide to the downstream, midstream and upstream sectors, while assuring the audience humans will still run the show.