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Cheniere Strikes LNG Marketing Deal with JPMorgan

June 30, 2008
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Cheniere Energy Inc. marketing subsidiary Cheniere Marketing Inc. has reached a domestic marketing agreement for the sale of liquefied natural gas (LNG) with J.P. Morgan Ventures Energy Corp., a subsidiary of JPMorgan Chase & Co. The deal was expected as Cheniere struggles to restructure its business in a weak U.S. LNG market.

Cheniere Marketing will sell to JPMorgan LNG it acquires on delivery to the Sabine Pass Terminal in southwest Louisiana. Additionally, JPMorgan will acquire a portion of Cheniere Marketing's capacity for storage and regasification services for the LNG that JPMorgan purchases. JPMorgan Chase & Co, has guaranteed all of JPMorgan's obligations under the agreement. Financial details were not disclosed.

"We believe that JPMorgan's domestic natural gas business and their power generation asset base will make an excellent complement to the send-out capabilities of the Sabine Pass terminal," said Cheniere CEO Charif Souki. "We look forward to finding ways to incorporate the financial derivatives expertise of JPMorgan into our LNG origination effort for the benefit of our suppliers."

Last month Cheniere said it chalked up a $50 million loss in the first quarter (see NGI, May 12). The company has been exploring options for unwinding contracts. In February Cheniere said it was exploring strategic options, including optimizing the Sabine terminal and the regasification capacity at the facility held under a long-term terminal use agreement by Cheniere Marketing (see NGI, March 3). On April 15 Cheniere announced the downsizing of its gas marketing activities and said it was negotiating an an outsourcing arrangement with a major North American gas marketer to manage the throughput of LNG and the downstream gas marketing for LNG cargoes delivered for Cheniere Marketing's account at Sabine Pass (see NGI, April 21).

The U.S. Energy Information Administration (EIA) said that through the first four months of 2008 LNG imports were about 115 Bcf, considerably less than the import total of 283 Bcf at the same time last year. Higher prices available to LNG suppliers for deliveries to both the Asia-Pacific region and Europe are shifting cargoes away from the United States, EIA said. A number of industry participants have said they expect the United States to remain a market of last resort for some time, at least until more liquefaction capacity becomes available worldwide (see NGI, May 26; May 19).

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