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PKN Orlen and Sempra Infrastructure sign long-term LNG sales and purchase agreement

A 20-year contract for the supply of one million metric tonnes of liquefied natural
gas (LNG) per year from the Phase 1 Port Arthur LNG development project has been signed between the Polish PKN Orlen and US Sempra Infrastructure, the Orlen Group announced on Wednesday (25 January).

The agreed volume of supplies covers about 10 per cent of Poland’s current gas demand.

“We are delighted to enter into this long-term agreement with Sempra Infrastructure,” said Daniel Obajtek, CEO of PKN ORLEN. “This is an important step towards strengthening PKN ORLEN’s position as a cornerstone of crude and fuel supply security in Central and Eastern Europe. Already last year, during a very tense situation in the EU energy market, the United States became one of the main suppliers of natural gas to Poland. By establishing a partnership with Sempra Infrastructure we are increasing the diversification of our import portfolio and we are securing additional volumes of natural gas, which will be used both to provide for the needs of the Polish customers and to enhance PKN ORLEN’s presence in the international energy market.”

The agreement between PKN ORLEN and Port Arthur LNG, LLC, an affiliate of Sempra Infrastructure, sets out the annual LNG delivery on a free-on-board (FOB) basis. The LNG cargoes will come from the Phase 1 liquefaction terminal under development in Jefferson County, Texas. The contract’s pricing formula is based on the Henry Hub index along with liquefaction costs.

“We are excited to partner with PKN ORLEN, Central Europe’s largest energy group, as they continue to look for long-term, diverse supplies of secure energy sources,” said Justin Bird, CEO of Sempra Infrastructure. “With the long-term off-take capacity for Phase 1 now sold under binding agreements, we expect to reach FID later this quarter and commence construction on the Port Arthur LNG Phase 1 project to help meet the increasing demand for LNG across Europe and the rest of the world.”

The Port Arthur LNG Phase 1 project is expected to produce, “under optimal conditions”, up to approximately 13.5 million metric tonnes of LNG per year. Port Arthur LNG has entered into long-term sales and purchase agreements covering more than 10 million metric tonnes of the terminal’s annual production. The company expects to reach a final investment decision for the Phase 1 project later this quarter.

Following the signing of the agreement with Sempra Infrastructure, the total volume of PKN ORLEN’s contracts with US LNG suppliers has increased to nearly eight million metric tonnes of liquefied natural gas per year, according to the company’s newsletter. The vast majority of the LNG portfolio – 6.5 million metric tonnes of LNG per annum – will be supplied on the FOB basis, hence the company’s development of ORLEN Group’s shipping capacity based on a long-term charter of LNG carriers. The first two ships, built specifically for ORLEN Group, will enter into service this year. By the end of 2025, the Group will have eight vessels in total.

The FOB delivery allows the buyer to decide the port of destination of the cargo. The ORLEN Group has booked re-gasification capacity at two terminals: the President Lech Kaczynski Terminal in Świnoujście, Poland and the FSRU Independence in Klaipeda, Lithuania. Poland’s second LNG terminal, which will be located in the Gulf of Gdansk, is planned for 2028.

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