Cheniere Energy Partners LP has completed all milestones and has instructed Bechtel Oil, Gas and Chemicals Inc. to move forward with construction of the first two liquefaction trains for the Sabine Pass natural gas liquefaction project in Louisiana, the Houston-based company said.
The first liquefaction train is expected to begin operations as early as 2015, with the second liquefaction train expected to begin operations six-nine months later.
"The Sabine Pass LNG [liquefied natural gas] terminal will become the first facility in the contiguous U.S. capable of exporting natural gas as LNG," according to Cheniere CEO Charif Souki. "Two years after announcing our plans to develop the liquefaction facility [see Daily GPI, June 7, 2010], we will begin construction. In those two years, we were able to finalize long-term commercial arrangements with four global LNG buyers for over 2 Bcf/d for 20 years [see Daily GPI, Jan. 31], negotiate a construction agreement for the first 1 Bcf/d on a lump sum basis, and most importantly work with governmental agencies at the federal, state and local level to receive all necessary permits to begin construction on a new facility with no precedent in the Lower 48 [see Daily GPI, April 17; Dec. 30, 2011; May 23, 2011; Sept. 13, 2010]."
The liquefaction facility would permit Sabine Pass LNG and Sabine Pass Liquefaction, both units of Cheniere Energy, to liquefy and export up to 2.2 Bcf, or 16 million metric tons per year, of domestically produced gas. The project would be sited at Sabine Pass' existing LNG import terminal in Cameron Parish, LA. In May FERC gave the company the go-ahead to start initial site preparation.
Approximately $2 billion of equity and $3.6 billion of debt will fund the $5.6 billion project, Cheniere said.
In May Cheniere 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 (see Daily GPI, May 16) and two Asia-focused investors -- Temasek and RRJ Capital -- agreed to put $468 million into Cheniere Energy Partners affiliate Cheniere Energy Inc. (see Daily GPI, May 8). The LNG developer said it would use the proceeds, combined with cash on hand, to buy $500 million of equity securities expected to be issued by Cheniere Energy Partners LP to finance Sabine Pass LNG (see Daily GPI, April 18).
The Federal Energy Regulatory Comission (FERC) last month rejected Sierra Club's request for rehearing of orders approving a proposal by Sabine Pass Liquefaction LLC and Sabine Pass LNG LP to liquefy and export natural gas, as well as the environmental group's plea to stay the orders (see Daily GPI, July 30).
Since giving Cheniere the green light in April, DOE has put the non-FTA permitting process on hold while it assesses the impact of LNG exports on domestic gas markets. But LNG export competition may be on the horizon for Cheniere. In June an Obama administration official hinted that more permits would be issued (see Daily GPI, June 22), and bipartisan groups of U.S. representatives have urged the Department of Energy to expedite approval of applications to export LNG (see Daily GPI, Aug. 8).
By the end of 2017 eight new export projects could be operational with a combined capacity of 10 Bcf/d, according to analysts at Raymond James & Associates Inc. (see Daily GPI, May 22). By Raymond James' count, there are now 14 projects to export liquefied North American gas at some stage of development, including the existing operational terminal on the Kenai Peninsula in Alaska (see Daily GPI, Dec. 20, 2011) and three projects proposed for British Columbia (BC), two at Kitimat and one on Douglas Island.
Freeport LNG Expansion LP recently struck 20-year liquefaction tolling agreements with Osaka Gas Co. Ltd. and Chubu Electric Power Co. Inc. covering 100% of the liquefaction capacity of the first train of Freeport LNG's propose liquefaction and LNG loading facility near Freeport, TX (see Daily GPI, Aug.1).
Once LNG exports begin, volumes will be smaller than many expect with a modest impact on domestic gas markets, according to one global gas market expert (see Daily GPI, Aug. 9). But linking U.S. gas markets with the world will cause Asian and European market players to take gas storage positions in the United States, he said.
©Copyright 2012 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.