A unit of BG Group plc has agreed to additional purchases of liquefied natural gas (LNG) from the proposed Sabine Pass Liquefaction LLC facility on the Gulf Coast, Sabine Liquefaction parent Cheniere Energy Partners LP said Thursday.
BG Gulf Coast LNG will take an additional 2 million metric tons per year of LNG, bringing its total contract quantity with the project to 5.5 million metric tons yer year. BG is to purchase 3.5 million metric tons per year with the commencement the project's first train and will purchase a portion of the remaining commitment amount as each of trains two, three and four begin operations, Cheniere said.
Terms of the revised agreement are essentially the same as the deal struck by the companies in October (see Daily GPI, Oct. 27, 2011). At the time the agreement was the first for the export of U.S.-sourced LNG from the Gulf Coast. BG will pay Sabine Liquefaction a fixed charge for the contracted quantity and will pay a contract sales price for LNG indexed to the Henry Hub. The fixed sales charge will increase ratably in order to account for the increased fixed sales charge on the additional volumes, Cheniere said.
Cheniere CEO Charif Souki said there was a "trade-off" in deciding whether to sell the additional volume to BG or in the open market."Contracting a portion of the additional volumes adds further certainty to the long-term cash flows of the project and preserves the opportunity for additional upside," he said.
The project is slated for the existing Sabine Pass LNG regasification terminal site and is expected to include four liquefaction trains capable of producing up to 18 million metric tons per year of LNG.
Sabine Liquefaction is seen as the front runner among a pack of projects that would export U.S. gas as LNG from the Gulf Coast. It was the first to announce a project and the first to get approval to export to countries that are parties to a free trade agreement (FTA) with the United States.
More significantly, Sabine Pass is the only project to be granted U.S. Department of Energy (DOE) authorization to export to non-FTA countries (see Daily GPI, Jan. 3). While other projects are seeking this authorization as well, the DOE is expected wait until it completes a review of the potential impact of LNG exports on domestic gas prices before it authorizes further non-FTA exports (see Daily GPI, Jan. 20).
"There is little doubt that the North American resource base has the geological potential to support the needs of at least a few liquefaction terminals," analysts at Barclays Capital said in a note Tuesday. "But the most challenging link to these projects is lining up the right buyers and sellers to put forth a financeable deal."
The Barclays analysts said they expect 2 Bcf/d worth of LNG exports from North America by 2017.
So far, Sabine Liquefaction has entered into three LNG sale and purchase agreements: the BG agreement, an agreement with Gas Natural Fenosa (see Daily GPI, Nov. 22, 2011) and an agreement with GAIL (India) Ltd. (see Daily GPI, Dec. 13, 2011). Sabine Liquefaction expects to sell an additional 3.5 million metric tons per year of LNG under an agreement that would take effect with the start of train three. This would bring total contracted volumes to 16 million metric tons per year, or about 90% of the project's expected volumes.
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