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British energy giant BP plc (BP - Analyst Report) has inked an agreement to ship liquefied natural gas (LNG) processed at a terminal in Freeport, Texas. The agreement is for two decades.

Per the deal, BP will export 4.4 million tons per annum (mtpa). The deliveries are expected to commence in 2017, from the plant’s first unit. The liquefaction tolling agreement with BP will begin upon the completion of Freeport LNG’s second production unit or train.

In July 2012, Freeport disclosed its commitment with two Japanese companies, Osaka Gas and Chubu Electric Power, for 4.4 mtpa of LNG per year from its first train. The agreements will be operational upon the completion of construction of the units.

The construction at Freeport is subject to various approvals from the US authorities, including the consent from the Federal Energy Regulatory Commission (FERC). It also awaits clearance from the US Department of Energy (DOE) to export LNG to non-free trade agreement countries. A final investment decision is expected by the end of 2013.

Freeport has already successfully completely booked the first two liquefaction trains and therefore expects to get the construction permission to bring its project online as scheduled by 2017.

Several facilities are awaiting federal consent for natural gas exports. Till date, only one export facility from Cheniere Energy in Louisiana has been cleared by regulators.

BP’s commitment to export LNG overseas, in the current scenario holds immense potential. In the long race, wherein several companies are trying to participate in this new venture, BP’s early entry is noteworthy. This will help the company to strengthen its  relationship with the leading national energy companies.

Natural gas oversupply has resulted in rock bottom prices in the last decade and has compelled companies such as Royal Dutch Shell plc (RDS.A - Analyst Report), ExxonMobil Corporation (XOM - Analyst Report) and Total SA (TOT - Analyst Report), to ship North American production overseas.

BP holds a Zacks Rank #3, which is equivalent to a short-term Hold rating.

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