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Sabine Pass LNG Terminal Opens Door for Business

At a ceremony last Monday formally opening Cheniere Energy Inc.'s Sabine Pass liquefied natural gas (LNG) import terminal and interconnecting Creole Trail Pipeline in Louisiana, Energy Secretary Samuel Bodman sharply criticized state officials who are opposing the development and construction of LNG facilities in other parts of the nation.

"It is somewhat discouraging to see that efforts to construct additional LNG terminals elsewhere in the United States are being discouraged by some elected officials. In my judgment, they should not try to block their construction -- they should welcome it," he said.

"These terminals are valuable not just for the jobs they bring to the American people, but because of the role terminals will play in bringing environmentally responsible, affordable energy to American people," Bodman told other federal government officials and state representatives who attended.

"This new [Sabine Pass] facility, the first domestic onshore regasification terminal built [in the U.S.] in more than 25 years, will help us diversify our energy supplies, suppliers and supply routes."

In addition to Bodman, others attending the ceremony included U.S. Sen. David Vitter (R-LA), Rep. Charles Boustany (R-LA) and current and former officials of the Federal Energy Regulatory Commission, as well as members of the Louisiana Legislature and local officials.

The Sabine Pass terminal received its first LNG shipment (145,000 cubic meters from Nigeria) on April 11 (see NGI, April 21). The initial cargo, which will be used to cool down the facility, came more than three years after FERC approved the Sabine Pass project (see NGI, Dec. 20, 2004).

Sabine Pass is the largest LNG receiving terminal in North America by regasification capacity at 4 Bcf/d and has 16.8 Bcf of LNG storage capacity with two berths capable of handling the largest LNG vessels. It is located on 853 acres of land remote from dense population and 3.7 miles from the open waters of the Gulf of Mexico.

The terminal is owned by Cheniere Energy Partners, LP, in which Houston-based Cheniere Energy Inc. has a 90.6% interest through its ownership of common units, general partner units and subordinated units.

The opening ceremony came as Moody's Investors Service last Monday placed Sabine Pass LNG LP's Ba3 rating for its senior secured notes due in 2013 and 2016 under review for possible downgrade.

"The review for downgrade takes into account Sabine's extensive relationships with Cheniere Energy Inc. and the growing negative pressures on Cheniere's financial and business prospects," said Moody's analyst Clifford Kim. "Recent developments in the LNG and capital markets are likely to result in Cheniere confronting lower than expected cash flow generation and dwindling liquidity over the next two years."

Just days prior to the Moody's warning, Standard & Poor's Ratings Services reported that it placed its 'B' corporate credit rating on Cheniere Energy and its 'BB' senior secured rating on Sabine Pass LNG on CreditWatch with negative implications. This was in response to Cheniere Energy's recent announcement that it is negotiating a deal to outsource the marketing of regasified LNG at the Sabine Pass terminal (see NGI, April 21).

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