NGI: Cheniere Selling LNG to EDF at European Spot Prices

A unit of Cheniere Energy Inc. has struck what is thought to be the first U.S. liquefied natural gas (LNG) supply deal linked to European spot prices, implying confidence in the staying power of low U.S. gas prices, analysts said.

Subsidiary Cheniere Marketing International LLP entered into sales arrangements with Electricite de France S.A. (EDF) for the delivery of LNG cargoes on an ex-ship basis (DES) from the Sabine Pass LNG terminal to the Dunkerque LNG terminal in France. The agreement covers up to 26 cargoes, or up to about 100 million MMBtu, through 2018. The sales price is linked to the Dutch Title Transfer index (TTF), a natural gas pricing index in continental Europe.

"This is a significant deal for a number of reasons," analysts at Tudor, Pickering, Holt & Co. (TPH) said in a Thursday morning note. "It is, we believe, the first U.S. LNG deal that is linked to European spot prices. It implies that Cheniere thinks it can make money at current European gas futures prices over the next few years of about $7/Mcf and that U.S. gas prices will stay low."

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