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Blackstone Invests $1.5B in Sabine Pass Project

In another move to fund its Sabine Pass LNG liquefaction project in Louisiana, Cheniere Energy Partners LP has agreed to sell $1.5 billion in newly issued CQP Class B units to investment funds managed by Blackstone Energy Partners LP and Blackstone Capital Partners VI LP, the Houston-based company said last week.

The deal follows an announcement earlier this month that two Asia-focused investors -- Temasek and RRJ Capital -- would put $468 million into Cheniere Energy Partners affiliate Cheniere Energy Inc. (see NGI, May 14). The LNG developer plans to use the proceeds, combined with cash on hand, to buy $500 million of equity securities to finance the LNG export facility (see NGI, April 23).

Blackstone and Cheniere Energy Inc. agreed to purchase 100 million and 33.3 million, respectively, of Class B units for $15/unit, Cheniere said. The board of directors of the general partner of Cheniere Partners would be comprised of 11 directors, with four appointed by Cheniere, three by Blackstone and four independent directors.

"Financing is the last milestone we need to complete in order to proceed with the construction of the first two trains of our liquefaction project at Sabine Pass," according to Cheniere CEO Charif Souki, who said commencement of operations is targeted for 2015.

The Federal Energy Regulatory Commission (FERC) last month approved a proposal by Cheniere units Sabine Pass Liquefaction LLC and Sabine Pass LNG LP to site, construct and operate LNG facilities, the first authorization within the United States.

Up to 2.2 Bcf/d, or 16 million metric tons a year, would be liquefied and exported from an existing Sabine Pass import terminal in Cameron Parish, LA. Cost before financing for the first two trains of the project is estimated at $4.5-5 billion and is expected to be funded from a combination of debt and equity.

The project would enable the terminal to receive and process an average of 2.6 Bcf/d, including fuel and inerts such as carbon dioxide and water. Sabine Pass would continue to provide import, regasification and re-export services, as requested, to customers under existing terminal use agreements.

On the contracting front Cheniere has been making steady progress. It has inked four contracts to supply LNG to units of BG Group, Spain's Gas Natural Fenosa, Korea Gas Corp. (Kogas) and Gail (India) Ltd. for a total of 16 million metric tons per year capacity (see NGI, Feb. 6).

Creole Trail Pipeline Co. LP recently asked FERC for the go-ahead to modify its system to accommodate the delivery of raw gas to the Sabine Pass project. The project would provide a total of 1,530,000 Dth/d of firm reverse flow capacity on the pipeline for the delivery of feed gas to Sabine Pass.

The Creole Trail project, which has an estimated price tag of $104 million, calls for the construction of a new 53,125 hp Gillis Compressor Station, modifications to three existing meter and regulation stations to allow bi-directional flow and increased capacity, and a 42-inch diameter pipeline lateral connecting the Gillis Compressor Station to the existing Creole Trail Pipeline, all in Beauregard Parish, LA.

The project would be constructed in two phases. Phase one is scheduled to begin during the fourth quarter of 2013 and be completed by the fourth quarter of 2014, while phase two construction is planned to begin in the first quarter of 2016 and be completed in the second quarter of 2016.

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