Woodside LNG supply deal a sign that long-term agreements are back

LNG supply restrictions produced by a cooler than expected winter season and the resulting surge in LNG spot prices might have activated a renewed interest in long-lasting agreements.

This is highlighted by Woodside Petroleum (ASX: WPL) signing an arrangement to supply 0.84 million tonnes per year (Mtpa) of LNG from its international portfolio to Germany’s RWE Supply & & Trading for a seven-year duration from 2025.

Australia’s biggest LNG manufacturer states the contract is additional proof of strong market demand for LNG in the 2nd half of this years.

“Customers are progressively seeking to protect new energy products in a timeframe which supports the development of our Scarborough offshore gas resource and the growth of the Pluto facility with the addition of a 2nd LNG production train,” Woodside executive VP development and marketing Meg O’Neill stated.

It includes to a binding arrangement made with Uniper in January for a preliminary 1Mtpa of LNG from this year that increases to 2Mtpa in 2026 and definitely includes weight to the business’s anticipated final financial investment choice in the 2nd half of this year on developing Scarborough and Pluto Train 2.

The LNG supply deal is a further advancement of the relationship between the two business.

In October 2020, Woodside and RWE signed a memorandum of understanding to talk about mutually beneficial hydrogen-related chances.

RWE is no complete stranger to the sector, progressing some 30 hydrogen jobs, the majority of which lie in Europe.

Australian LNG

More broadly, Australian LNG shipments in January increased by 0.2 Mt over December last year to 6.7 Mt (96 cargoes).

This was due to increased production from Pluto and the restart of production at the Start job.

Japan remained Australia’s biggest LNG customer, with 43 shipments made. This is up from the 41 shipments in December but down on 45 freights provided in January 2020.

Additionally, the LNG spot cost increased from $US15.10 per million British thermal units (MMbtu) on 31 December 2020 to a record high of $US32.50/ MMbtu on 13 January before reducing to $US8.48/ MMbtu.

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