BEIJING, Nov 9 (Reuters) - Delfin Midstream, developing the first floating facility to export U.S. natural gas, has sealed a preliminary 15-year sales deal with city gas distributor China Gas Holdings, Delfin founder and Chief Executive Officer Frederick Jones said.
Industry veteran Jones, a pioneer of spot crude oil trade in the 1970s, told Reuters in an interview that as well as agreeing to supply 3 million tonnes a year of liquefied natural gas (LNG) from 2021, Delfin is also tapping unnamed Chinese banks to fund its ambitious $8 billion LNG project, set to sit 50 miles off the coast of Louisiana.
A rapidly growing spot market worldwide for LNG, allied with global oversupply of the super-chilled fuel for at least the next few years, is transforming an energy business that traditionally counts on 20-30 year purchase agreements to bankroll projects.
“It’s a very significant challenge to secure long-term buyers given the rise of spot market and oversupply,” said Jones. A founder-shareholder of legendary trading business Marc Rich & Co, Jones was in Beijing as part of a trade delegation accompanying U.S. President Donald Trump on his visit to China.
“We’re open to either or both types of investment...banks for debt and some strategic investors who want LNG partially under their control,” said Jones. “We’ve seen a lot of interest from Chinese banks to finance shipping.”
Delfin said in June it would jointly develop the Louisiana project with Golar, a provider of floating FLN technology. Jones said Delfin will borrow from Golar’s experience in tapping Chinese banks for loans, without identifying institutions by name.
The memorandum of understanding to supply China Gas Holdings Co Ltd, announced on Thursday, sees Delfin link up with one of China’s most active city gas distributors, operating 100,000 kilometres of pipelines.
Delfin also signed on Wednesday a memorandum of understanding with Chongqing Oil and Gas Exchange to help develop a trading platform to the connect domestic Chinese market with international markets, emulating the established benchmark Henry Hub in the states.
Chongqing, in western China next to the country’s largest natural gas province of Sichuan, operates an extensive gas grid.
Reporting by Chen Aizhu; Editing by Kenneth Maxwell