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Osaka Gas and Shell sign long term supply agreement

LNG Industry,

Osaka Gas Co. Ltd and Shell Eastern Trading Pte. Ltd (Shell) signed today a binding Sale and Purchase Agreement (SPA) for the long-term supply of LNG.

According to the terms of the SPA, Osaka Gas will receive deliveries of LNG from Shell of up to 800,000 tpa for 25 years commencing in April 2012. The LNG in this new contract will be supplied from Shell’s global LNG portfolio.

Osaka Gas believes that a ‘portfolio supply’ of LNG contributes to improving the value of LNG purchasing for the company through minimising risks associated with supplies.

The initial five years of the 25 year term of the contract are a firm supply, and the remaining 20 years are linked to the final investment decision of the Prelude LNG project, currently under development by the Shell group in Australia.

Prelude LNG is currently still in the FEED stage of development and a final investment decision is not expected until 2011, the facility is currently expected to have a capacity of 3.6 million tpa of LNG. Production of LNG is not expected to start from Prelude LNG earlier than 2016 though, which is the reason why only the first five years of the contract are for a firm supply. This will be the first time that Prelude LNG has been included as part of any supply deal.

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