Woodside struggles to sell LNG at Louisiana LNG plant according to sources

Two people familiar with the matter have told us that Woodside Energy, Australia's energy company, is having difficulty selling liquefied gas volumes produced by its planned Louisiana LNG export facility. This is because Woodside Energy wants liquefaction rates above current U.S. market prices. Woodside Energy, an Australian energy company, has announced so far only one long-term purchase and sale agreement for the project. It is a contract with Germany's Uniper that covers up to 2,000,000 metric tons of LNG per year. This is about 25% of Woodside’s share of the plant’s output, excluding the 8 million tonnes of LNG that it decided to keep in its portfolio. Producers charge liquefaction fees on top of base energy prices to convert natural gas into a liquid for transportation. The price of U.S. LNG has been increasing due to labor shortages, rising construction costs and strong demand.

One of the sources stated that "the problem Woodside faces is the high price of its liquefaction fee, which is higher than what other companies in the U.S. charge." This person said that Woodside originally sought liquefaction charges above $2.80 for every million British thermal units. The broader U.S. markets rates are around $2.40 to 2.50 per mmBtu. Source: Cheniere Energy, the largest U.S. energy producer, charges slightly higher fees, around $2.60. Venture Global, on the other hand, is one of the lowest, at $2.30. A source familiar with pricing discussions stated that Woodside's offer was?attractive? in certain aspects, such as contract duration. However, pricing is a sticking-point.

Source: "Woodside offers 10-year contracts that are attractive, but the sticking price has been the cost," said the source. They wanted $2.80 for mmBtu, but now offer it at $2.60.

WOODSIDE HAS REPORTED STRONG CUSTOMER INTERESTS Woodside declined comment. Speaking at a news conference following Woodside's annual meeting, CEO Liz Westcott stated that customer interest was strong and the company felt confident about progress made at Louisiana LNG.

Westcott stated that "many customers see the benefits of geographical diversification, and are comfortable with the way the Louisiana LNG process is progressing."

"We continue to have a competitive price on the market." She added that we were part of the next round of LNG projects and are one of the "lower-cost LNG providers". Woodside has included the Louisiana LNG project in its expansion strategy for North America. They are betting on an?administration that is pro-fossil fuels and a?growing demand for gas globally. The first phase of the project will cost approximately $17.5 billion. Woodside sold 40% of its facility to Stonepeak, a U.S. investment company. Williams, an energy infrastructure firm based in the U.S.A. took the remaining 10%. The first phase involves the construction of a three-train facility, or processing unit with a total capacity of 16.5 mtpa. Woodside has sold off 50% of its plant and said that it will retain just over 8 million tons of LNG while selling the remaining 8.5 through long-term contracts. Woodside has a supply agreement with Uniper that will allow the German company to take up to 1 mtpa LNG from Louisiana over a period of 13 years, as well as an additional 1mtpa LNG from its global portfolio. Louisiana LNG will be operational in 2030.

Mike Smith, CEO of Freeport LNG complained last month that the liquefaction fee was too low. The company would not build any new capacity if the price per mmBtu is below $3. Curtis Williams, Houston Reporter; Nathan Crooks & Nick Zieminski, Editors

(source: Reuters)