Cheniere Energy Partners LP said it expects to net about $60 million in public offerings, some of which would be used to fund development costs of its proposed addition of liquefaction capacity to the Sabine Pass LNG (liquefied natural gas) import terminal in Cameron Parish, LA. However, in order to advance the project still needs contracted customers.
“Cheniere Partners intends to use the net proceeds for general business purposes, including development costs of its expansion project to add liquefaction capacity at the Sabine Pass LNG terminal,” the partnership said. In a related filing with the Securities and Exchange Commission (SEC) it was made clear that liquefaction capability at Sabine Pass is not yet a sure thing and may never come to be.
Plans are for the liquefaction facility to be designed and permitted for up to four LNG trains, each with production capacity of about 4 million metric tons per year. Cheniere Energy Partners said LNG exports could begin as early as 2015 if the project moves forward. LNG trains may be constructed in phases, coming on line about six to nine months apart.
“We intend for Sabine Liquefaction LLC, our wholly owned subsidiary, to enter into long-term commercial contracts for at least 3.5 [million metric tons per year] (approximately 0.5 Bcf/d) per LNG train, before reaching a final investment decision regarding the development of the LNG trains,” the partnership said in its SEC filing. “We are negotiating definitive agreements with potential customers.”
While Cheniere Energy Partners has been touting talks with a number of parties (see Daily GPI, Feb. 14), a deal has yet to materialize.
The addition of liquefaction capability would render the Sabine Pass facility bidirectional with the capability to offer customers the flexibility to both import and export LNG depending upon market conditions. Such a capability has been touted by Cheniere; however, analysts at Pan EurAsian Enterprises Inc. in a report on U.S. LNG export prospects released this week (see Daily GPI, Sept. 14) said “bidirectionality” is overrated because it “ignores what we call ‘no man’s land.’
“No man’s land is the differential range that still has U.S. prices for natural gas lower than foreign prices, but not low enough to meet the requirements set out by the Cheniere [pricing] model and the U.S.-sourced LNG will be too expensive for foreign markets. However, the cost of LNG imported into the U.S. will also be too expensive to sell in the U.S. markets.”
As Pan EurAsian sees it, no man’s land is about $4/MMBtu wide. If gas prices at Henry Hub are $4/MMBtu and LNG is being landed in the United Kingdom for $6/MMBtu, U.S. exports won’t be attracted to the UK, nor will the U.S. be able to import LNG, they said.
In the same report Pan EurAsian said a Lower 48 LNG export terminal is more likely to be developed on the U.S. East Coast, near the huge Marcellus Shale gas play. Dominion Cove Point LNG Inc., which has an East Coast import terminal, earlier this month sought permission to export LNG from the U.S. Department of Energy (DOE) (see Daily GPI, Sept. 7).
Earlier this year Cheniere Energy Partners’ Sabine Pass Liquefaction LLC received DOE approval to liquefy and export U.S. gas from Sabine Pass to any country that has or develops import capacity (see Daily GPI, May 23). The order expanded upon an authorization Sabine received last September that authorized exports to all current and future Free Trade Agreement countries (see Daily GPI, Sept. 13, 2010).
The public offering of three million common units representing limited partner interests of Cheniere Partners and a concurrent offering to Cheniere Common Units Holding LLC, a subsidiary of Cheniere Energy Inc., of 622,131 common units are both priced at $15.25/common unit, Cheniere said Wednesday. Citigroup is acting as underwriter and was granted a 30-day option to purchase up to 450,000 additional common units to cover overallotments.
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