TotalEnergies Offtake Agreement and Leaked EAO Report
TotalEnergies Investment
Last week, Western LNG announced a significant new financing development. TotalEnergies, the French oil major and a significant player in the North American LNG market, signed a 20-year purchase agreement with Ksi Lisims LNG and made an investment into Western LNG.
Purchase Agreement
The purchase or "offtake" agreement is for 2 million tonnes per year, or 1/6th of Ksi Lisims's proposed capacity. This is the second purchase agreement the facility has lined up. The last one was announced in January 2024 with Shell and is also a 20-year, 2 million tonnes per year agreement, meaning that Ksi Lisims has lined up potential purchasers for 1/3rd of its capacity.
These purchases are on a "free-on-board basis." Free-on-board means that the gas becomes the responsibility of the buyer — Shell or TotalEnergies, in these cases — as soon as its loaded onto the LNG carrier at the Ksi Lisims terminal. It's not entirely clear whether these agreements require Total and Shell to purchase 2 million tonnes per year, but given that Ksi Lisims is currently trying to attract financing, they'll be looking to secure that type of contract as much as possible.
Equity Stake
Total also agreed to take on a 5% stake in Western LNG and indicated that it has the option to increase that stake to 10% at the time of final investment decision (FID). It isn't clear whether or how much Total paid for the stake, and it was definitely connected with the purchase agreement.
We'll write more about Western LNG in a company profile in the future, but suffice to say here that it is a small, Houston-based company run by industry insiders connected to Cheniere, a major gas corporation. Western received a significant round of investment at the end of 2024 led by Blackstone, a giant American private equity firm with close ties to Donald Trump. In earlier press releases, Western highlighted the dollar value of its investments, which suggests that Total's equity stake may have been granted in exchange for the offtake agreement, though this is entirely speculation.
Implications for the Project
As the Financial Post put it, "The offtake agreements have been welcome demonstrations of the project's commercial viability for its backers," but they will need to line up more backing in order to attract the financing necessary to proceed with the project. The business media is likely overstating the significance of this purchase agreement, but it does represent a step towards convincing the investment community that the project is worth financing, and it is plausible the BC government will point to these offtake agreements as evidence in support of the project.
Leaked Draft EAO Report
The Globe and Mail obtained a copy of a report produced by the BC Environmental Assessment Office (EAO) regarding the "substantial start" decision for the PRGT pipeline. Key highlights from the report include:
- updated cost estimate for PRGT coming in at $10-12 billion, later confirmed by the CEO of Western
- PRGT claims to have "created equity ownership opportunities for any first nation" and that it is actively seeking additional Indigenous equity participation in the project
- EAO repeated "We expect a determination to be made in spring 2025." It remains unclear where they draw the line for the end of spring
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