Page 5 - LatAmOil Week 50 2020

LatAmOil COMMENTARY LatAmOil

While RBN also pointed out some potential well as an offtake agreement relating to that pro-
challenges related to sending US gas to the ECA ject. The challenging market this year has caused
LNG site, depending on which pipeline network Total to sell down its stake in Tellurian earlier
is used, Sempra appears to be betting that the this year, however, cutting it from 19% to 17.4%
plant will benefit from its location. And given according to regulatory filings.
intensifying competition in the LNG market, Tellurian has struggled to move forward with
which remains oversupplied, exporters will be Driftwood LNG, delaying an FID on the project
keen to seize on any advantage available to them. earlier this year and failing to finalise an offtake
Now, Total’s investment appears to back up agreement with India’s Petronet LNG. Total is
Sempra’s confidence in its decision to proceed reported to be able to back out of its Driftwood
with the project – though the fact that the agree- LNG commitments if an FID is not made by
ment came after an FID was reached may be June 2021.
indicative of LNG players being more cautious Total also has offtake agreements for
about their investments than before. Cheniere Energy’s Sabine Pass LNG and for the
Total already had an offtake agreement for third train at privately owned Freeport LNG. It
ECA LNG, which was signed earlier this year, inherited the Freeport contract when it acquired
for roughly 1.7mn tpy of LNG over a 20-year Toshiba’s US LNG business last year. Total’s investment
period. As with FIDs on LNG projects, long- Globally, the French company has also been appears to back
term offtake agreements have been rare this year, on an LNG-focused spending spree over the
but the fact that this deal was struck suggests that past few years, most notably buying Anadarko up Sempra’s
at least some interest still remains in locking in Petroleum’s 26.5% stake in Mozambique LNG
supply over the long term. for $3.9bn last year, and taking on operatorship confidence in
ECA LNG also has a 20-year sale and pur- of that project.
chase agreement (SPA) in place with Japan’s Mit- Further investments in the LNG industry its decision to
sui & Co., covering 800,000 tpy, which means can be expected from Total, though how much proceed with the
that all of the plant’s initial offtake capacity is more it wishes to grow its LNG business will
fully contracted. depend in part on how the energy transition ECA project
evolves. There have been suggestions that natu-
LNG giant ral gas will increasingly fall out of favour over the
Total’s decision to buy equity in ECA LNG longer term, with operators shifting their focus
marks an extension of both the French compa- to renewables instead. But there are considerable
ny’s LNG co-operation with Sempra and of its costs involved in moving away from oil and gas
already extensive LNG investments. altogether, and the LNG industry has sought to
Total and Sempra signed a memorandum of talk up gas’ role as a bridge fuel that would still
understanding (MoU) on the development of be cleaner than coal but more affordable than an
North American LNG projects in 2018. Under all-out shift to renewables.
the MoU, the companies agreed to look at Total Total says on its website that it is seeking to
potentially contracting for up to 9mn tpy of provide cleaner energy, for example by using
LNG offtake across both ECA LNG and a pro- LNG to partly fuel its LNG tankers. The com-
posed second phase of Cameron LNG in Loui- pany has a target of net zero greenhouse gas
siana. Total also has a 16.6% stake in Cameron (GHG) emissions by 2050 and can be expected
LNG, which has been online since 2019, and – like other European peers – to increasingly
buys a portion of the output from Phase 1 of that focus on that goal.
project. This could involve a shift to carbon-neutral
Total’s North American LNG investments LNG, among other steps, or a broader move
are not limited to its co-operation with Sempra, away from LNG over the long term. On the other
which currently appears to be one of its more hand, cost considerations could keep Total and
successful LNG partnerships. The French com- other major LNG players prioritising the super-
pany also owns a stake in Tellurian and its pro- chilled fuel as a major part of their portfolios for
posed Driftwood LNG project in Louisiana, as many years to come. ™

(Photo: IEnova)

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