Australian oil and gas producer Woodside Energy will supply QatarEnergy with liquefied natural gas, the company said on Thursday, as the Middle East war disrupts operations at the Qatari firm, one of the world's largest LNG producers.
The 20-year deal gives QatarEnergy, which has been buying LNG from US exporters to supply customers, a source from outside the Persian Gulf while shipping through the Strait of Hormuz is blocked. It also helps Woodside sell capacity at its Louisiana project, which has few committed buyers.
Reuters reported on the deal last week, citing three people with knowledge of the matter.
"What really strikes me is the length of the contracts. If you were just trying to fill a three- or four-year gap, you wouldn't be signing 20-year contracts," said Hersh Oberoi, global research director at Balfour Capital Group.
"Qatar is clearly treating the Hormuz risk as something that is not going away."
The Qatari company also informed some of its clients that they would not receive LNG until the end of this year, according to Italian utility Edison and market sources on Tuesday.
The commodity's prices have remained near multiyear highs, supported by ongoing concerns over the conflict and forecasts for colder weather.
Under the deal, Woodside will supply LNG on a free-on-board basis from the start-up of Louisiana LNG Train 2, increasing to three million tonnes per annum (mtpa) from the start-up of Train 3.
The project, which constitutes a $17.5 billion investment as of August, is a 16.5 mtpa export facility under construction and is targeting first LNG in 2029.
Woodside, Australia's top independent oil and gas producer, has been struggling to sell LNG volumes in Louisiana, as it sought liquefaction fees above US market rates, Reuters reported in May.
Before QatarEnergy, Woodside had only secured one long-term sales and purchase agreement for the project, a deal with Germany’s Uniper.
(Reporting by Nichiket Sunil in Bengaluru, additional reporting by Kumar Tanishk; Editing by Mrigank Dhaniwala and Harikrishnan Nair)