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Vitol Group, Cheniere Energy sign 15-year, long-term LNG supply deal

Geneva

CHENIERE Energy Inc struck a 15-year liquefied natural gas (LNG) sale and purchase agreement with Vitol Group, marking another long-term deal for the US producer as trading houses look to secure supply.

The deal marks the second extended accord with a major independent trading house forged this year by Cheniere, which agreed to a 15-year sale agreement with Trafigura Group Ltd in January. For Vitol, which started trading LNG in 2005 and now handles about 10 million tonnes a year, this is its first long-term deal to buy the super-chilled fuel.

"Vitol is much more than just a trading house," Pablo Galante Escobar, head of LNG at Vitol in Geneva, told reporters in Barcelona, where the deal was signed on the sidelines of a conference. The contract means Vitol can offer flexibility to its clients, "not just on a short-term basis, but also on a long-term basis", he said.

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Traders including Vitol, the biggest independent oil trader handling more than seven million barrels per day, are trying to lock in long-term supplies of the super-chilled gas as it becomes more popular for power plants and as demand from importers such as China increases.

As the market has evolved and as more traders join, long-term deals have been on the rise. This year, people are rediscovering the value of accords of 10 years or longer. Cheniere signed in February a long-term contract with China. Earlier this month, the Asian nation agreed to a 22-year deal with Qatar, the biggest LNG producer.

Vitol will buy about 0.7 million tonnes of LNG per year from Cheniere Marketing, a subsidiary of the Houston-based supplier, on a free on board basis, the companies said in a statement. The purchase price for the LNG will be indexed to the monthly price at Henry Hub in the US and will also include a fee, they said.

The deal shows US LNG has regained momentum again. Since early 2018, a second wave of projects set to bring more than 10 million tonnes per annum to the market under sales and purchase agreements has reached the starting blocks, according to energy consultants Wood Mackenzie.

"The increase in the number of projects is remarkable," said Kristy Kramer, a director of gas research for the Americas at Wood Mackenzie.

The four largest LNG trading houses boosted volumes by 65 per cent to 28 million tonnes last year from 17 million tonnes in 2016 and as little as two million tonnes in 2012, Andrew Walker, vice-president for strategy at Cheniere, said in May.

LNG will be supplied from Cheniere's marketing portfolio, from either of the company's LNG plants, Sabine Pass or Corpus Christi, Cheniere's chief commercial officer Anatol Feygin said in Barcelona.

"I don't think it will be our last deal," Vitol's Mr Escobar said. "Hopefully, we will do more - with Cheniere and other companies." BLOOMBERG