LNG deal opens door for Texas imports to UK

ExxonMobil and Qatar Petroleum have agreed a deal making it possible for the UK to import liquefied natural gas from their proposed $10bn export project at Golden Pass in Texas, opening up a new source of potential gas supply for Britain.

Exxon said the two companies had agreed to make capacity available at their South Hook receiving terminal at Milford Haven, south Wales, to take cargoes of LNG from Golden Pass, and would soon start negotiations on the commercial details of the plan. The sales would require US government approval.

The deal was part of a framework agreement between the two companies to ship and market the entire planned production from Golden Pass of 15.6m tonnes of LNG a year.

South Hook, which is also jointly owned by Qatar Petroleum and Exxon, has the capacity to take all of that LNG which could meet about 25 per cent of the UK’s gas demand.

Exxon’s agreement with Qatar Petroleum on selling Golden Pass’s production marks a further step forward for the project, one of 26 proposed US LNG plants that have applied to the Department for Energy for export permits.

The slump in US natural gas prices caused by the shale boom has opened up potentially lucrative opportunities for sales to Europe and Asia.

Barack Obama indicated at the weekend that he supported increased gas exports, in part as a way to expand US influence overseas.

However, there are several other LNG projects that are likely to be approved before Golden Pass.

The company developing it, a joint venture owned 70/30 by Qatar Petroleum and Exxon, applied in October last year for permission to sell to countries that do not have a trade agreement with the US, which include the UK and other members of the EU.

That put Golden Pass at 13th place in the list of projects applying for such permits, and the energy department has said it will work through applications in the order in which they were received.

The next approval, likely to be for the Freeport LNG project, also in Texas, is expected in the next few weeks, following a two-year delay since the first – and so far only worldwide gas export license was granted to Cheniere Energy’s Sabine Pass project in Louisiana.

The administration is facing competing pressures from gas producers and exporters who want unrestricted foreign sales, and consumers such as chemical companies who want to hang on to their feedstocks of cheap US gas to preserve their competitive advantage.

There has been talk in the industry that projects with commercial arrangements in place for their LNG could have their applications considered more quickly.

South Hook was originally built to receive LNG from the huge export projects built in Qatar in the 2000s.

The UK has become a large gas importer over the past decade as its domestic production has declined, although its imports have fallen a little since 2010.

BG Group and Centrica of the UK have both signed deals with Cheniere to buy LNG from Sabine Pass.