Delfin Midstream Inc. on Monday announced another binding agreement to sell LNG to an affiliate of commodity trader Hartree Partners LP and said it expects to sanction its floating offshore production facility in the Gulf of Mexico (GOM) by the middle of the year.
Under the sales and purchase agreement (SPA), Delfin would sell 0.6 million metric tons/year of liquefied natural gas to Hartree on a free-on-board basis for a 20-year period. Hartree would pay prices indexed to Henry Hub.
The Delfin floating LNG (FLNG) project would consist of four vessels offshore Louisiana with a nameplate capacity of 3.5 mmty each. The company signed another binding agreement with commodity trader Vitol Inc. last year to supply 0.5 mmty. It also has up to 3 mmty committed in tentative deals with UK utility Centrica plc and U.S. onshore producer Devon Energy Corp. that still need to be finalized.
But Delfin said Monday that those heads of agreements, along with the SPAs it now has in place with Vitol and Hartree, are sufficient to make a final investment decision (FID) in the coming months. Vitol and Devon would also make equity investments in the Delfin project under the agreements.
“The Delfin project’s ability to make FID one vessel at a time is attracting significant interest from buyers, and Delfin is already in advanced discussions for marketing LNG for its second FLNG vessel,” said CEO Dudley Poston.
The company has appointed Citi as its financial structuring adviser and “is well advanced in securing project level equity and debt for the first FLNG vessel,” management said.
COO Wouter Pastoor added that the company is finalizing construction contracts for multiple identical liquefier vessels, “which will offer material cost savings and position us to make FID on our second FLNG vessel by the end of this year.”
For Hartree, which already has an outsized role in the U.S. natural gas market, the deal allows it to tap into the growing export market. Hartree’s Stephen Hendel, a founding managing director, said the SPA would “support our wider strategy of delivering low cost, tailor-made and reliable LNG supply chain solutions that meet the specific requirements of our customers.”
The Delfin project has been in the works for years, but it was slowed down by the regulatory process and the Covid-19 pandemic. An FID on the project has slipped more than once.
The company purchased the UTOS pipeline, the largest in the GOM in 2014, to feed the project. It also owns the Grand Cheniere pipeline system, which could ultimately be used to feed its Avocet LNG project that would add another two FLNG vessels offshore Louisiana.
