Page 5 - GLNG Week 23

GLNG AmERiCAs GLNG
Cheniere pursues next phase of LNG growth
The second wave of US LNG projects is getting under way, amid increased global competition
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cheniere is pushing ahead with expansion at sabine pass and signing innovative agreements at corpus christi.
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forecasts suggest there may be an lNG shortage in the mid-2020s.
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too many projects piling into the lNG market may tip into over supply.
CHENIERE Energy, the US’ leading LNG exporter, is taking additional steps to grow its business. The company operates two of the US’ four active LNG export terminals – Sabine Pass and Corpus Christi. Last week, Cheniere announced that it had made a nal investment decision (FId) on a sixth train at Sabine Pass in Louisiana. e company also noted that it had increased the run rate production guid- ance for each of its liquefaction trains to 4.7-5.0 million tpy of LNG, up from 4.4-4.9 million tpy previously.
Cheniere said in a June 3 statement that it had given Bechtel, the lead contractor on its liq- uefaction facilities, full notice to proceed with construction of Train 6. e company’s contract with Bechtel is worth US$2.5 billion. e unit is anticipated to enter service in 2023.
Cheniere’s subsidiary, Cheniere Partners, has entered into ve-year, US$1.5 billion sen- ior credit facilities with 29 banks and nancial institutions. e transaction, which closed on May 29, will be used to fund part of the con- struction of Train 6 and a third LNG berth, as well as necessary supporting infrastructure. e facilities include a US$750 million delayed draw termloan,andaUS$750millionrevolvingcredit facility, Cheniere added.
e FId was widely expected, a er the com- pany entered into an offtake agreement with Malaysia’s Petronas in december 2018 to sup- port Train 6. Another o ake deal, with com- modity trader Vitol, is also expected to support the unit, even though that agreement covered sales of LNG starting in 2018.
Pricing evolution
Cheniere also announced it had entered into a 15-year gas supply agreement (GSA) with Apache, with the nature of the deal indicating that the exporter could move away from its previous gas-pricing model. Under the GSA, a subsidiary, Cheniere Corpus Christi Liquefac- tion Stage III, will buy 140,000 million Btu (3.9 mcm) per day of gas from Apache’s operations in the Permian Basin. “Apache will receive an LNG price, net of a xed liquefaction fee and certain
costs incurred by Cheniere, for the natural gas delivered to Corpus Christi Stage III under this agreement,” Cheniere said in a statement. “ e LNG price is based on international LNG indices.”
This is a move away from the US bench- mark-linked model that Cheniere has relied on previously. The company has been selling LNG to its long-term buyers for about 115% of the Henry Hub price, plus a liquefaction fee of roughly US$3 per mmBtu (US$82.98 per 1,000 cubic metres). is insulates Cheniere against US gas price uctuations while covering lique- faction costs. But industry sources were cited by Reuters as saying that a deal to buy gas from Apache at an LNG-indexed price would give Cheniere the exibility to sell its output using di erent pricing structures. Such a move appears to make sense in an increasingly competitive global LNG market.
“LNG export projects are being delayed because of the limited demand for [Henry Hub]-indexed LNG supply ... limited but not non-existent,” one industry source told Reuters. “If US LNG projects can sell on other indices, then it will likely lead to an increase in US LNG exportsinthelongterm.”
Cheniere’s president and CEo, Jack Fusco, said: “This first-of-its-kind long-term agree- ment with Apache represents a commercial evo- lution in the US LNG industry, as it will ensure the continued reliable delivery of natural gas to Cheniere from one of the premier producers in the Permian Basin, while enabling Apache to access global LNG pricing and receive ow assurance for its gas.”
The agreement is anticipated to support the next phase of growth at Cheniere’s Cor- pus Christi terminal on the Texas Gulf Coast, which will involve a shi to small-scale lique- faction trains. e third stage of development at the terminal is being planned to include up to seven 200 mmcf (5.7 mcm) per day trains, each with a capacity of 200 mmcf (5.7 mcm) per day. Cheniere expects to make a positive FId on this stage of Corpus Christi LNG in 2020, and said it anticipates receiving all the remaining regulatory
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