Glencore Energy to Source LNG from Marathon Oil in Equatorial Guinea

According to a press release on Monday 16 October 2023, Marathon Oil and Glencore Energy reached an agreement for the supply of liquefied natural gas. Based on the agreement, Marathon Oil will supply Glencore Energy natural gas extracted from the Alba Field in Equatorial Guinea.

Marathon Oil is a US firm while Glencore Energy is a subsidiary of UK Glencore Group. The agreement comes into effect on 1 January 2024 and is for a period of five years.

The price of the LNG will be allowed to fluctuate based on the Dutch Title Transfer Facility (DTTF) Index. Previously, the two Parties had another sales and supply contract based on the Henry Hub pricing in the USA. The TTF is only the preferred gas trading platform used by the European Union and its virtual marketplace allows for online trading of energy commodities.

The EU Quarterly Gas Market Report for 1Q23 stated that Europe remained the most attractive market for gas in terms of pricing.

“For most of the first quarter of 2023, Europe remained the most attractive gas market offering price premiums of 3.38 EUR/MWh [$3.56 per MWh] in February and 2.34 EUR/MWh [$2.47 per MWh] in March continuing the almost unbroken 2022 trend of higher prices in Europe than those in Asia.”

The DTTF average spot price for 1Q23 was USD 56.19 per MWh, falling 41% compared to the previous quater 4Q22. On the other side of the Atlantic, the Henry Hub in Louisiana State was also down by 52% over the same period.

However, the market expects an increase in prices as futures contract for gas are currently priced slightly higher than spot prices. Thus, quarter-ahead price was $0.8 higher than spot price while the year-ahead contracts were transacted with a $2.06 premium over current spot price.

 “The timing of this new sales agreement, EG LNG’s track record of reliable operations, and the plant’s proximity to Europe resulted in tremendous demand and an extremely competitive process. This success positions us strongly for the next phase of opportunities to advance the E.G. Gas Mega Hub, including up to two infill development wells in the Alba Unit and the potential tie-in of the third-party Aseng gas cap monetization”

Marathon Oil CEO Lee Tillman

In the same breath, Marathon Oil announced that the parties to the Equatorial Guinea Regional Gas Mega Hub sealed a pact to proceed with the 2nd and 3rd phases of the natural gas development project. The Parties involved include the Government of Equatorial Guinea, Marathon and Chevron.

Gas from Phase II will be used to execute the supply contract to Glencore. Phase III will develop the resources from Aseng Field.