Export of liquefied U.S. natural gas from the Gulf Coast drew another step closer to reality Monday as Cheniere Energy Partners LP unit Sabine Pass Liquefaction LLC said it had struck its second sale and purchase contract -- with Gas Natural Aprovisionamientos, a unit of Gas Natural Fenosa.

The deal calls for Gas Natural Fenosa to buy 3.5 million metric tons of liquefied natural gas (LNG). Sabine Liquefaction is developing liquefaction capabilities to produce 9 million metric tons per year of LNG in the first phase of its project at the Sabine Pass LNG terminal, which is in Cameron Parish, LA, and owned by Cheniere Partners.

"This contract with Gas Natural Fenosa is another milestone for the project as Sabine Liquefaction has now reached its contract capacity target of 7 million metric tons per year, which is expected to support the construction of the first two trains," Cheniere said.

Sabine Pass recently inked a deal to sell LNG to a unit of BG Group for export worldwide (see Daily GPI, Nov. 10; Oct. 27).

Gas Natural Fenosa will pay Sabine Liquefaction a fixed sales charge for the full annual contract quantity and will also pay a contract sales price for LNG purchases based on the applicable Henry Hub index traded on the New York Mercantile Exchange. LNG will be loaded onto Gas Natural Fenosa's vessels. The agreement has a term of 20 years and an extension option of up to 10 years. LNG deliveries are expected to commence in 2016, Cheniere said.

The agreement is subject to conditions such as Sabine Liquefaction receiving regulatory approvals, securing necessary financing arrangements and making a final investment decision to construct the liquefaction facilities.

"Gas Natural Fenosa is a leading, integrated natural gas and power utility and a significant participant in the natural gas and LNG markets," said Cheniere CEO Charif Souki. "With this agreement and the previously announced agreement with BG Gulf Coast LLC, we have reached our contract capacity target for the first phase of our project. We will now proceed towards making a final investment decision in order to start construction on the first two liquefaction trains in early 2012."

Gas Natural Fenosa operates in more than 25 countries, has more than 20 million customers and has 15.8 gigawatts of installed power generation capacity. It is the largest integrated gas and electricity company in Spain and Latin America, leading the natural gas sales market in the Iberian Peninsula, and it is the biggest distributor of natural gas in Latin America, according to Cheniere. The company has a fleet of 10 LNG tankers.

According to PanEurasian Enterprises Inc., for the week ending Nov. 18 Spain had the highest average sendout of regasified LNG in its survey, posting sendout of 1,703 MMcf/d, followed by the United Kingdom at 1,552 MMcf/d. U.S. sendout during the period averaged 852 MMcf/d.

Cheniere Partners owns 100% of the Sabine Pass LNG receiving terminal, which has regasification and sendout capacity of 4 Bcf/d and storage capacity of 16.9 Bcfe. Cheniere Partners is developing a project to add liquefaction and export capabilities to the existing infrastructure at Sabine Pass.

The project is being designed and permitted for up to four modular LNG trains, each with a nominal capacity of about 4.5 million metric tons per year. The liquefaction project is expected to be constructed in phases, with each LNG train commencing operations approximately six to nine months after the previous train.

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