Glencore, Marathon Oil seal LNG deal in Equatorial Guinea

Marathon Oil has striked a liquefied natural gas sales agreement with Glencore for the Alba field in Equatorial Guinea.

The agreement which is set to be effective from January 1, 2024, involves the sale of a portion of the equity natural gas produced from the Alba Field. The pricing structure for this LNG sales agreement is linked to the Dutch Title Transfer Facility (TTF) index, with a fixed transportation fee subtracted from it. This arrangement is designed to give Marathon Oil exposure to the European LNG market.

The company also plans to optimize its integrated gas operations in Equatorial Guinea in 2024. This involves redirecting some of the natural gas from the local methanol facility to the LNG facility. This optimization is likely driven by expected arbitrage opportunities between LNG and methanol pricing.

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EBITDA

Marathon Oil expects to realize an approximate year-on-year EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) increase of over US $300M next year across its Equatorial Guinea integrated gas business. This increase is expected to position the company strongly for future opportunities, including the development of the Gas Mega Hub (GMH).

Marathon Oil is working on the development of the GMH’s Phase II and III. Phase I of the GMH was achieved with the tie-back of the Alen field to Punta Europa onshore facilities, which started delivering gas in February 2021. Phase II is expected to increase exposure to global LNG pricing, and Phase III is anticipated to facilitate gas processing from the Aseng field at Punta Europa facilities.

Marathon Oil’s Chairman, President, and CEO, Lee Tillman, expressed excitement about this new sales agreement, which marks the conclusion of the legacy Henry Hub linked contract. He cited the timing, the reliability of EG LNG’s operations, and the proximity of the plant to Europe as factors that drove strong demand and competitiveness in the process.