TOTAL BUYS U.S. LNG

PLATTS - France's Total is making a play for Royal Dutch Shell's dominance in access to North American liquefaction supplies with an agreement disclosed Friday to take over Toshiba's LNG business in the US, after an earlier deal with China's ENN to acquire the assets fell apart.

The transaction, among other things, will give Total control over 2.2 million mt/year of LNG to be produced by the third train at the Freeport LNG export terminal in Texas. The facility is currently preparing to begin production from its first train, after several construction- and weather-related delays hampered the project.

More broadly, Total will strengthen its foothold in the region as a buyer and marketer of LNG. It also has been making inroads on the liquefaction and export side, with a preliminary agreement announced in April to take a stake in Tellurian's proposed Driftwood LNG project in Louisiana. Tellurian at one time was a potential suitor for the Toshiba assets.

Total's moves will make it a stronger competitor to Shell, a foundation customer at Cheniere Energy's Sabine Pass export terminal that also has long-term contracts with several other major US LNG plants and is a partner in the LNG Canada project in British Columbia. Such diversification helps portfolio players reduce operational risk on any one project and provides different options for which cargoes go where.

Total will receive about $800 million from Toshiba in exchange for acquiring the Japanese electronics maker's US LNG business. In essence, Toshiba will pay $815 million to Total, while Total will pay $15 million to Toshiba, which is part of the terms of the complicated transaction announced in a statement on Toshiba's website.

These terms are similar to that which ENN had agreed to before backing out in April. ENN cited the failure of its deal to be completed by a certain time.

Freeport LNG must approve the release of Toshiba's obligations at the terminal and Total's guarantee of the obligations, which is expected to occur by March 31, 2020, Toshiba said. A Freeport LNG spokeswoman declined to comment when contacted via e-mail. Total officials declined to comment, but were planning to issue a statement Saturday.

Amid the US shale revolution that unlocked vast reserves of cheap natural gas, Toshiba signed a binding 20-year agreement in 2013 with Freeport LNG for offtake from the Quintana Island facility upon completion of the third liquefaction train there. Uncertainties about future LNG prices and a lack of synergies with its other businesses forced Toshiba's decision in November 2018 to dump its US LNG business and focus on its core operations.

Over the course of several months, Toshiba held extensive negotiations with multiple companies about offloading its US LNG assets.

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