Williams nears 1st LNG deal bridging gap between US producers, global markets

Williams Cos. Inc. expected to finalize its first LNG offtake deal this year as the company evaluates "a number of competing opportunities" beyond its ongoing negotiations with Sempra Energy, executives for the US midstream giant said.

Williams, a major pipeline operator, has said it wants to use its entry into marketing US LNG supplies to broker back-to-back transactions that connect global LNG buyers and US natural gas producers seeking exposure to international prices.

"We are seeing really positive, strong interest in both producers wanting access to international prices and international LNG buyers wanting access to domestic producers," Chad Zamarin, Williams executive vice president of corporate strategic development, said during a May 4 earnings call.

"We haven't finalized a definitive agreement yet, but we continue to build confidence around our ability to add LNG as an extension of our natural gas value chain in a way that will provide for fixed margins for Williams while shifting that international price exposure to producers and LNG buyers," Zamarin said.

Zamarin said Williams expects to finalize a deal "with Sempra or with an alternative LNG partner sometime here in the near term, 2023."

Sempra deals

Williams in November 2022 signed preliminary deals to buy a total of 3 million metric tons per year of LNG from Sempra's proposed Cameron LNG LLC terminal expansion in Louisiana and the second phase of its Port Arthur LNG LLC terminal project in Texas. The announcement of the nonbinding heads of agreements did not spell out the mechanics of how Williams would act as an offtaker under the transactions, which called for LNG to be delivered free on board over a 20-year term.

Williams executives said the company could use its vast gas transportation network with a first-quarter contracted transmission capacity of 32.5 Bcf/d to offer LNG buyers exposure to "a more native price index" in the US beyond benchmark Henry Hub prices.

"We can be a unique bridge between domestic producers and international buyers for a product that really isn't available broadly today because the international buyer has to buy US gas at a Henry Hub index," Zamarin said.

Sempra commercially sanctioned the 13.5-MMt/y first phase of the Port Arthur project in March. The developer has described the second phase of Port Arthur, similar in size to the first, as the next project the company will look to advance to construction after a proposed single 6.75-MMt/y train expansion of its Cameron terminal. Sempra has said it could commercially sanction the Cameron expansion after completing a front-end engineering design process as soon as this summer.

'Wellhead to water'

Williams' pursuit of an LNG offtake deal is part of the company's broader "wellhead-to-water strategy" of connecting US natural gas supplies certified as low in greenhouse gas emissions to the LNG export facilities concentrated on the US Gulf Coast.

The company has described the development of its 1.8-Bcf/d Louisiana Energy Gateway project as a key part of this strategy. The trunkline system, which could come online later this year with an expected in-service date in 2024, will connect supplies from the Haynesville Basin to growing LNG export markets. Williams secured a long-term capacity commitment on the project in February with Chevron Corp.

Williams is also adding more than 2 Bcf/d of capacity though projects on its Transcontinental Gas Pipe Line Co. LLC natural gas transportation system. The company said LNG export volumes along the Transco corridor are expected to more than double through 2032, with about 23.8 Bcf/d of volumes associated with LNG projects that are existing or under construction and another 17.1 Bcf/d of volumes associated with LNG projects that have not reached final investment decisions.

Williams on May 3 reported a net income of $926 million for the first quarter of 2023, up from $379 million in the same period of 2022.

S&P Global Commodity Insights reporter Corey Paul produces content for distribution on Platts Dimensions Pro.