In Cheniere Energy’s (ticker: LNG) 2013 annual report, Chairman and CEO Charif Souki said, “it became apparent to us a few years ago that we must find demand or the hydrocarbon revolution will stop.”
Locating demand for its liquefied natural gas (LNG) doesn’t seem to be a problem for the Houston energy company. Over the past year and a half, the company has inked a dozen 20-year sale and purchase agreements for the LNG that will be coming from the two U.S. LNG export plants it has in development. Together the plants represent approximately 40.5 million tons per annum (mtpa) of LNG that is destined for global markets, or approximately 5.5 Bcf/d of natural gas.
The company is planning to ship LNG from two natural gas liquefaction and LNG export facilities that will be located along the U.S. Gulf coast—one at the site of its LNG receiving terminal at Sabine Pass, in Cameron Parish, Louisiana, and the other near Corpus Christi, Texas. Sabine Pass is presently under construction and is targeting first export shipments in 2015. Sabine Pass “effectively kicked off the new LNG export frenzy,” the Houston Chronicle said. Cheniere is looking for first LNG shipments from its Corpus Christi plant in 2019. The Corpus Christi plant is in the design and permitting phase.
Of 12 LNG export projects that are currently proposed for the U.S., Sabine Pass is the only one presently in the construction phase.
Cheniere is focused on building nine LNG liquefaction trains at its two Gulf coast locations, a $31 billion investment. LNG produced by its liquefaction plants is expected to be approximately 40.5 mtpa, representing approximately 5.5Bcf/d of natural gas. LNG output at Sabine Pass will come from up to six liquefaction trains that are now in various stages of construction and/or permitting. At 4.5 mtpa per train, Sabine Pass design capacity will be approximately 27 mtpa of LNG. At Corpus Christi, expected aggregate nominal production capacity is approximately 13.5 mtpa of LNG from three proposed LNG trains.
Widespread Global Marketplace for U.S. LNG
Cheniere sees total global LNG import demand growing from 236 mtpa, the approximate equivalent of 32 Bcf/d, in 2012, to 532 mtpa (approximately 71 Bcf/d) in 2030, based on data in its June investor presentation. Roughly 90% of the projected global demand for imported LNG is projected to come from Asia and Europe through 2030, according to the Cheniere presentation.
Customers who have LNG sale and purchase agreements with Cheniere include BG Group (ticker BG.L), Gas Natural Fenosa, Korea Gas Corporation (ticker 036460.KS), GAIL (India) (ticker: GAIL.BO), Total (ticker: TOT), Centrica (ticker: CNA.L), Pertamina, Endesa S.A. (ticker: ELE.MC), Iberdrola S.A. (ticker: IBE.MC), and Woodside Energy Trading Singapore (ticker: WPL.AX).
- BG Group—UK, global
- Gas Natural Fenosa—Spain, global
- Korea Gas Corporation—South Korea
- GAIL (India)—India
- Endesa—Spain, Latin America
- Iberdrola S.A.—Spain
- Woodside Energy Trading Singapore—Australia
Attractive LNG Pricing, Untied from Crude
Cheniere says it offers attractive pricing for the liquefied natural gas from its U.S. LNG export facilities. Using an example of $4.00/MMBtu cost for Henry Hub gas, it calculates LNG cost at 115% of Henry Hub, putting it at $4.60 plus $3.50 for liquefaction fee, and $1.00 to ship to Europe for a total of $9.10 for European contracts. Compared to worldwide LNG prices which Cheniere says are 11% to 15% of crude oil, this is a significant savings. If Brent crude is trading at $100 per barrel, European buyers would save $2.90 with Cheniere’s LNG price structure.
On a contract for Asia, Cheniere says the LNG cost would be $4.60 plus $3.50 liquefaction fee, plus $3.00 for shipping, for a total of $11.10. In this pricing structure, Cheniere’s LNG represents a savings of $3.90 from the 15%-of-crude LNG pricing for Asia.
Cheniere’s LNG contracts from trains 1-4 at Sabine Pass are fully subscribed; train 5 at Sabine Pass is subscribed and trains 1 and 2 at Corpus Christi are fully subscribed.
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