BP has signed a head of agreement with Australia's Beach Energy to purchase 3.75 million tonnes per annum of LNG sourced from the Waitsia gas field.

The Waitsia field is uniquely placed as the first source of third-party gas supply into the North West Shelf (NWS) LNG facility; BP is a part owner of the NWS asset.

Beach, which has a 50% interest in the Mitsui-operated Waitsia project, said the agreement with BP contains all material terms and conditions for BP to buy all 3.75 million tpa of Beach’s LNG volumes from the second half of 2023 until the end of 2028.

Beach said supply will be delivered on a free-on-board basis from the NWS facilities in Karratha, Western Australia, which leverages BP's LNG trading and shipping capability.

The agreed LNG price is linked to both Brent and Japan Korea Marker price indices (with full upside exposure to each) and includes a downside price protection mechanism.

"This hybrid pricing structure is expected to provide Beach with favourable price movements during North Asia winter periods," said the Australian seller.

The two parties are targeting execution of a fully-termed LNG supply and purchase agreement in the second half of financial year 2022.

The Waitsia Stage 2 development, which underpins the LNG supply deal with the NWS, is a US$700 million to $800 million onshore project in the Perth basin that will develop about 760 billion cubic feet of gas.

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