US-based Marathon Oil, through its wholly owned subsidiaries, has signed a liquefied natural gas (LNG) supply agreement with Glencore’s subsidiary Glencore Energy UK.
Under the five-year agreement, Glencore Energy will receive a portion of Marathon Oil’s equity natural gas produced from the Alba Field in Equatorial Guinea (E.G.).
The agreement is effective from 1 January 2024.
According to Marathon Oil, the LNG sales agreement’s pricing structure is linked to the "Dutch Title Transfer Facility (TTF) index, less a fixed transportation fee". This provides significant incremental exposure for the US company to the European LNG market.
Separately, Marathon Oil is planning to optimise its E.G. integrated gas operations in 2024.
This optimisation entails redirecting a portion of Alba Unit natural gas from the local methanol facility, in which Marathon Oil owns a 45% working interest, to the LNG facility, where it holds a 56% working interest. The decision is primarily driven by the anticipated arbitrage between LNG and methanol pricing.
Marathon Oil chairman, president and CEO Lee Tillman said: "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.
“At recent forward curve pricing, we expect to realise an approximate year-on-year EBITDA [earnings before interest, taxes, depreciation and amortisation] increase of over $300m next year across our E.G. integrated gas business, reflecting our differentiated and increasing exposure to the global LNG market.”
Marathon Oil owns a 64% working interest in the field located in the block Alba Development Area, with a water depth of 335ft.
Glencore oil and gas marketing head Alex Sanna said: "We are delighted to further expand our cooperation with Marathon Oil. This deal reconfirms our commitment to the growth and diversification of our LNG portfolio as we continue to support producers and end users as a reliable and responsible off-taker and supplier."
