U.S. pipeline operator Energy Transfer (NYSE: ET) announced on Wednesday that it has entered into a nonbinding agreement with MidOcean Energy to jointly develop the Lake Charles LNG export facility in Louisiana.
Under the terms of the agreement, MidOcean will fund 30% of the project’s construction costs and receive a proportional share of the facility’s output—approximately 5 million metric tonnes per annum (MTPA) of LNG. Energy Transfer will remain the developer and operator of the plant.
Although nonbinding, the agreement marks a significant step forward in the project’s development. It is contingent upon Energy Transfer making a Final Investment Decision (FID) on the project. Energy Transfer has already secured both binding and nonbinding sales agreements covering 16 MTPA of the facility’s planned 16.5 MTPA capacity, bringing it closer to FID.
Such sales and purchase agreements are critical for securing financing, as they serve as revenue assurances for lenders funding large-scale LNG infrastructure projects.
The Lake Charles project was previously affected by the Biden administration’s decision to deny an extension of Energy Transfer’s export license to non-Free Trade Agreement (non-FTA) countries. This was followed by a broader moratorium on new LNG export licenses pending an environmental review.
Non-FTA licenses are essential for U.S. LNG developers as they permit exports to a wider range of global markets beyond countries with free trade agreements. While the Trump administration has resumed issuing such licenses, no new license or extension has yet been granted to Energy Transfer.
As part of the agreement, MidOcean Energy will have the option to independently source its natural gas feedstock and has committed to long-term gas transportation agreements on Energy Transfer’s pipeline network.