November 25, 2009 / 9:54 PM / 10 years ago

UPDATE 2-Conoco sells LNG to Citi from US Freeport terminal

(Adds details on buyer, wraps in LNG-REEXPORT/CITI)

By Edward McAllister

NEW YORK, Nov 25 (Reuters) - As the United States enjoys record-high stockpiles of natural gas, two deals have been struck to re-export previously imported liquefied natural gas to more needy markets abroad in December.

Customers at the Freeport LNG import terminal in Texas, one of the most under-used terminals in the United States, are now taking advantage of weak domestic demand by selling LNG in storage to buyers who can ship it across the globe.

ConocoPhillips (COP.N) has sold an LNG cargo, imported for cheap this summer, to Citigroup (C.N), which has chartered a tanker to export the gas to Europe or Asia where gas prices are more attractive for shippers.

The 150,000-cubic-meter Clean Force tanker is expected to dock at Freeport around Dec. 4 for loading, one source said.

A Citi spokeswoman confirmed the deal. This is one of the first LNG cargoes bought by Citi since entering the LNG market in August.

The Citi sale coincides with a similar re-export deal from Freeport by Macquarie Bank which is also expected to be completed in December. [ID:nN12421785]

The re-export of LNG is a symptom of lacklustre demand coupled with large domestic production increases in the United States.

The Freeport import terminal has seen little action since beginning operations in May last year, as low gas prices and weak demand in the Gulf of Mexico has deterred shippers from sending cargoes there.

However, in May Freeport received regulatory approval to re-export foreign-sourced LNG from its terminal. This enabled Freeport and its customers to profit from seasonal price swings by importing LNG during summer, storing it and re-exporting to higher-paying markets in winter.

The 6.4 bcf of storage capacity at Freeport is nearly full, giving customers such as Conoco the option to re-export.

Previously, analysts had not expected to see much re-exporting activity from Freeport this year because thin LNG price differentials between global markets slimmed profitability. But, as Asian LNG prices rise toward January, margins could widen. (Editing by Christian Wiessner and Lisa Shumaker) ((Edward.mcallister@thomsonreuters.com; +1 646 223 6221; Reuters Messaging:edward.mcallister.reuters.com@reuters.net)) ((For help: Click “Contact Us” in your desk top, click here [HELP] or call 1-800-738-8377 for Reuters Products and 1-888-463-3383 for Thomson products; For client training: training.americas@thomsonreuters.com; +1 646-223-5546))

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