Daily Oil Bulletin
Pricing, Certainty Of LNG Delivery Top Concerns For Buyers As Western Canada Pursues Offtake Contracts

Tuesday, October 09, 2012

While proponents for the Kitimat LNG project proposed by Apache Canada Ltd., Encana Corporation and EOG Resources Inc. are seeking an oil-indexed price, potential buyers of LNG may instead be aiming to index prices to lower North American prices, according to LNG analysts.

Also, certainty of LNG delivery may be a concern for the buyers, which may partly explain why a long-term offtake agreement still hasn't been announced. Last month, EOG's chief executive said that securing an oil-indexed contract with an Asian buyer has gone slower "than any of us expected" and didn't give a timeline on when a deal would be reached.

Ross Wyeno, energy analyst, LNG with BENTEK Energy, LLC, said that one of the reasons that offtake agreements may not have been reached yet is that the Kitimat project is marketing its LNG under long-term, oil-linked pricing arrangements -- in line with nearly all LNG shipped globally.

Since BENTEK estimates that in the foreseeable future there is only a finite window of opportunity for U.S. export projects to secure buyers, it seems unlikely that Jordan Cove would be able to achieve all regulatory approvals before the market dried up, he added.The primary advantage of the West Coast facilities is their location.

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