Spain’s Naturgy negotiates revised terms of major LNG supply deal

Highlights

Revised formula, lower volumes from 2020 with unnamed counterparty

Naturgy looking to revise all contracts, trim volume

LNG supply portfolio includes Trinidad, Nigeria, Qatar, Oman

Barcelona —
Spain’s largest gas group Naturgy said Sept. 29 it has agreed with one of its principal LNG suppliers to revise the conditions on two supply contracts, without naming the counterparty, and that it is in talks to modify other deals.

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Under the terms of the agreement, the two parties have agreed to revise the supply conditions, with revisions applicable from 2020.

Without disclosing more specific terms, Naturgy said that the annual contracted volume has been reduced from 2020 and that the price formula has been revised.

The move will allow Naturgy to optimize its supply mix and reduce its risk profile, the company said in a regulatory filing.

Following the impact of the COVID-19 pandemic on prices and volumes, Naturgy said earlier this year it would renegotiate a number of its gas and LNG supply contracts, in line with ordinary and extraordinary price review clauses in its contracts.

Naturgy said it is in ongoing talks with its other suppliers with the aim of reaching agreements before year-end. The company said in July it intended to cancel a number of long-term oil-indexed contracts for a total of 20 TWh/year, or around 6% of its annual sales volume.

Naturgy is a major player in the Atlantic Basin with a supply portfolio of around 30 Bcm/year, a fleet of 11 LNG tankers and capacity at several European regasification plants.

While its more recent contracts with US-based Cheniere are Henry Hub based, others are linked to Brent crude oil and based on lagging prices, causing a mismatch between gas spot prices and the company’s gas procurement, especially since contracts with its downstream customers are more closely linked to spot prices.

The two contracts which were revised have also modified the expiry dates of the contracts to September 2021 and September 2023.

Naturgy’s supply basket is dominated by a 9 Bcm/year contract with Algeria, valid through 2030, as well as 6.8 Bcm/year of LNG from US company Cheniere and 3.2 Bcm/year of LNG from Russia’s Yamal, all contracted through to between 2037 and 2042.

Among its shorter-term contracts, it recently confirmed 4 Bcm/year from Trinidad and Tobago ending 2023 and 4 Bcm/year from Nigeria ending 2023, as well as 2 Bcm/year from Qatar ending 2025 and 4 Bcm/year from Oman ending 2030.

Naturgy is also due to renegotiate a transit deal with Morocco related to the 12 Bcm/year Maghreb pipeline which is due to expire at the end of 2021, after which control of the pipeline reverts to Morocco.