Marathon Oil and Glencore ink LNG sales agreement in Equatorial Guinea

Houston-based oil and gas company Marathon Oil has entered into an LNG sales agreement with Glencore for the Alba field in Equatorial Guinea, effective from next year.

Through its wholly-owned subsidiaries, Marathon Oil entered into a five-year firm LNG sales agreement with Glencore Energy UK for a portion of its equity natural gas produced from the Alba Field, effective January 1, 2024.

According to Marathon Oil, the pricing structure for the LNG sales agreement is linked to the Dutch Title Transfer Facility (TTF) index, less a fixed transportation fee, providing the U.S. company with significant incremental exposure to the European LNG market.

Separately, due to the expected arbitrage between LNG and methanol pricing, Marathon Oil said it expects to optimize its Equatorial Guinea integrated gas operations in 2024 by redirecting a portion of Alba Unit natural gas from the local methanol facility (MRO 45% working interest) to the LNG facility (MRO 56% working interest).

“I’m excited to announce this new sales agreement linked to the European LNG market, signaling the conclusion of the legacy Henry Hub linked contract,” said Marathon Oil’s Chairman, President, and CEO Lee Tillman. “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.”

Tillman notes that Marathon Oil expects to realize an approximate year-on-year EBITDA increase of over $300 million next year across its Equatorial Guinea integrated gas business.

This is expected to position the company strongly for the next phase of opportunities to advance the Gas Mega Hub (GMH), 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 reported on March 30 that it would be working on developing the GMH’s Phase II and III, as Phase I was achieved with the tie-back of the Alen field to Punta Europa onshore facilities, which delivered first gas in February 2021.

The company expects Phase II to materially increase exposure to global LNG pricing, while Phase III of the GMH is anticipated to facilitate gas processing from the Aseng field at Punta Europa facilities.