ARC RESOURCES LTD. Cedar Liquefaction Agreement And Offtake Agreement Are A
Positive Step Forward
Our Conclusion
We expected to see a follow-on announcement to ARC’s original
Memorandum of Understanding (MOU) with Cedar LNG. We consider this
announcement to be another positive step towards an FID of the overall
Cedar LNG project. The terms are unchanged, with ARC delivering 200
MMcf/d of natural gas to the project for 20 years and an expected in-service
date of H2/28. The contract is ARC’s largest LNG commitment to date, which
will increase the company’s total global natural gas price exposure to 480
MMcf/d (~25% of ARC’s natural gas production by 2029). The Heads of
Agreement outlines the terms of a 20-year offtake agreement with an
investment-grade counterparty and is expected to be finalized by the end of
2024.
Key Points
Offtake agreement paves the way for additional LNG price exposure for
ARC. In addition to the liquefaction agreement, ARC announced a non-
binding Heads of Agreement (HOA) with a third party to supply 1.5 MMTPA
(200 MMcf/d) of LNG from the project for 20 years. The liquefaction tolling
agreement, combined with an anticipated sale and purchase agreement, will
enable ARC to get exposure to global LNG prices for gas sold through
Cedar.
Cedar issues notice to proceed. The notice directs Cedar’s EPC contractor
to finalize FEED studies and commence construction of the Cedar floating
LNG facility in Korea. Cedar expects to commence pre-FID work in May 2024
with FID by the middle of 2024. The in-service date of the facility is expected
to be late 2028.