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S&P Gives 'A' to Qatar LNG Expansion

U.S. receipt terminal operators may be buoyed by the Standard & Poor's Ratings Services (S&P) announcement last Monday that it was giving an "A" credit rating to the expansion of liquefied natural gas (LNG) liquefaction facilities in Qatar, which could become an increasingly important supplier to the United States. S&P placed a "stable" outlook on the Qatari government and ExxonMobil joint venture developing LNG processing infrastructure, Ras Laffan LNG Co.

The "A" rating is applied to $2.23 billion in senior secured bonds, the net proceeds of which will pay for the remaining work on RasGas LNG trains 6 and 7 at the expanding Qatar LNG production compound, as well as help partly repay $2.1 billion of intercompany loans and shareholder advances.

As part of the assessment, S&P analyst Karim Nassif said the strong credit rating factored in what S&P calls "the likelihood of favorable natural gas fundamentals in RasGas' target markets" during the next five years, along with reasonable spot market sales potential (such as it already has in the United States) during the next three years and strong operational performance.

San Diego-based Sempra Energy is one of the U.S. companies with a keen interest in Ras Laffan, having signed a deal last June getting much-needed start-up cargoes for its new Cameron, LA, LNG receiving terminal. It signed a "flexible" short-term agree.

Cargoes equivalent to about 4.8 Bcf each are to be shipped to Sempra LNG's Cameron facility near Lake Charles, LA. Sempra LNG officials were not available in September to confirm whether these shipments had begun as originally planned in August. With only 40% of its capacity under contract, the Qatar contract will allow Sempra to make fuller use of the facility in these unsettling economic times.

Nassif said the S&P's assignment of a stable outlook reflected its view that "the construction of train 7 and associated third-party terminals and ships will likely be completed in the first quarter of 2010."

Sempra's agreement was signed with an affiliate of RasGas Co. Ltd., a Qatari joint stock company established in 2001 by Qatar Petroleum and ExxonMobil, which are 70% and 30% shareholders, respectively. Last June Sempra LNG officials said they considered this deal with the world's largest LNG marketer a major breakthrough for the Cameron facility. They said the Qatari joint venture specifically selected Sempra and Cameron to break into the U.S. market, and they predicted that it would be a model for other short-term LNG deals in the immediate years ahead.

Four years ago Sempra signed a 20-year deal to provide Italy's Eni S.p.A, the global oil and gas production company, with approximately 40% of the Cameron facility's 1.5 Bcf/d capacity. As a result of the agreement, Sempra LNG eventually began construction of the import terminal, and the Eni shipments kick in next month after Sempra receives two commissioning cargoes at Cameron this month.

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