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Cheniere Unit Gets Another LNG Export Approval

Cheniere Energy Partners LP unit Sabine Pass Liquefaction LLC has received approval from the U.S. Department of Energy (DOE) to liquefy and export U.S. natural gas from the Sabine Pass LNG terminal to any country that has or develops import capacity.

The order expands upon the authorization Sabine Liquefaction received in September that authorized exports to all current and future Free Trade Agreement countries (see Daily GPI, Sept. 13, 2010). It concludes one of the key regulatory requirements necessary for the Sabine Pass liquefaction expansion project to proceed, Cheniere said.

Sabine Liquefaction received long-term, multi-contract authority to export on its own behalf, or as agent for others, up to 803 Bcf/year (about 16 million metric tons/year) of domestically produced natural gas as liquefied natural gas (LNG). Authorization is conditioned upon completion of the Federal Energy Regulatory Commission review process and upon Sabine Pass commencing export operations within seven years of the issuance of the order.

"This concluding authorization by the DOE is a significant milestone for our liquefaction expansion project at Sabine Pass that will transform our terminal into the first bi-directional LNG processing facility capable of importing and exporting LNG," said Cheniere Partners CEO Charif Souki.

"With the unprecedented growth in unconventional reserves, supply of natural gas continues to outpace demand dramatically. There are currently an estimated 3,500 wells that have been drilled but not completed with the potential to continue to boost production. The U.S. has an opportunity to become a significant supplier in the global energy markets."

However, successful export of U.S. gas into the world LNG market is not a sure thing, according to Terry Engelder, the Penn State University geosciences professor who helped prove the value of the Marcellus Shale. The United States can expect to face a tough spot market overseas, he told attendees at the recent GasMart 2011 conference in Chicago (see Daily GPI, May 16).

An April report from analysts at Pan EurAsian Enterprises concluded that the United States would likely be "a supplier at the margins" if it began exporting LNG (see Daily GPI, April 5).

To date, Sabine Liquefaction has entered into nonbinding memorandums for an aggregate of up to 9.8 million metric tons per year of processing capacity, well exceeding the targeted capacity of 7 million metric tons per year to complete the first two trains and has begun the process of converting the memorandums into definitive agreements.

Cheniere Partners owns 100% of the Sabine Pass LNG terminal located in western Cameron Parish, LA, on the Sabine Pass Channel. The terminal currently has regasified LNG sendout capacity of 4 Bcf/d and storage capacity of 16.9 Bcfe.

The liquefaction project would be designed and permitted for up to four modular LNG trains, each with a nominal capacity of approximately 4 million metric tons/year. LNG export could commence as early as 2015, Cheniere said.

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