Cheniere Energy has acquired an option to purchase a third land site for a liquefied natural gas (LNG) import terminal in Texas. The site near Sabine Pass, TX, will be used to build a receiving terminal that would deliver up to 1 Bcf/d of gas into the interstate pipeline grid. Cheniere had previously announced the acquisition of options for sites with port authorities at Freeport and Brownsville, TX, and still plans to line up a fourth site.

“All the work we have done continues to support our conclusion that Texas is well situated to develop LNG receiving terminals because of its extensive infrastructure for transportation and the large industrial demand in the state,” said Cheniere CEO Charles Reimer. “We have been in contact with several users of gas and potential LNG suppliers and have signed memoranda of understanding for the off take of 350 MMcf/d from our Freeport location. We believe that LNG will become a critical component of supply of gas within the current decade.”

Despite current low gas prices relative to last winter’s levels, Cheniere still is confident that there will be a long-term need to supplement domestic supply with LNG to serve rapidly growing gas demand. “We feel the imbalance in supply and demand will be there on a long-term basis and gas prices [between $2.50 and $3.50] will support these projects,” said spokesman David Castaneda. “You can land LNG at $2. The LNG may come from Trinidad, possibly Venezuela, Algeria or Nigeria. “There are currently a lot of ships on order and being built and there are people that specialize in that and will take care of that part of the business. Our expertise is in the handling processing and marketing.”

Each of Cheniere’s terminals are expected to have a throughput capacity of about 1 Bcf/d. The anticipated first throughput would begin in 2006. “Right now the Freeport terminal is ahead in the race, but that’s not saying the Brownsville or Sabine pass could jump ahead,” Castaneda added. “It’s a function of takeoff demand. Right now we have 350 MMcf/d of memorandums of understanding for [deliveries] from the Freeport terminal. That currently is local industrial demand. Gas from the proposed Brownsville terminal would serve demand in South Texas and northern Mexico. The gas from the Sabine Pass terminal would be delivered into the interstate grid.

“We’ve been looking at four locations always with the thought that we would get one or two built and permitted,” he said. “But obviously if the demand is there, we’ll move forward on building all four.”

He said the company is in the process of completing the environmental and engineering studies at the Freeport site and working on more contracts for deliveries. Cheniere expects to file an application at the Federal Energy Regulatory Commission once it gets contracts for the entire throughput at any of its facilities. Assuming prompt regulatory approvals, construction of the first terminal could start as early as 2003 with LNG being imported as early as late 2005.

The Houston-based energy company owns 20% of Gryphon Exploration with Warburg Pincus Equity Partners LP owning the other 80%. Cheniere conducts exploration in the Gulf of Mexico using a regional database of 7,000 square miles of 3D seismic data.

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