It’s far from a done deal, but the potential for export of U.S. natural gas from the Lower 48 states crept closer last week with announcements by Cheniere Energy Partners LP that it is in talks with two parties for capacity on its gas liquefaction and export facilities proposed for the Sabine Pass liquefied natural gas (LNG) terminal in Cameron Parish, LA.
Cheniere said its Sabine Pass Liquefaction LLC unit is in talks with China’s ENN Energy Trading Co. Ltd. and separately with Morgan Stanley Capital Group Inc. Cheniere is pursuing the development of liquefaction capability at the import terminal, which would allow it to export gas produced in the United States as LNG (see NGI, Sept. 13; Aug. 30). If the project goes forward, Sabine Pass would be the only permanent LNG export facility in the Lower 48.
Under a memorandum of understanding (MOU) Sabine Pass is negotiating with ENN for it to contract for bi-directional capacity for a primary term of 20 years with possible extensions, subject to regulatory and other approvals for the construction of liquefaction facilities at Sabine Pass. ENN could contract for 1.5 million metric tons per year of bi-directional LNG processing capacity at the terminal, Cheniere said.
ENN is a subsidiary of ENN Energy Holdings Ltd. and is one of the largest independently owned natural gas operators in China. Through its gas distribution business ENN has obtained rights for delivering piped gas in more than 80 cities in 15 provinces across China with a combined connectible urban population of approximately 45 million, Cheniere said.
“ENN Energy Trading is an ideal customer that is expanding its natural gas distribution network and seeking new sources of natural gas supply in order to increase its customer connections and increase its sales volumes,” said Cheniere CEO Charif Souki.
According to Cheniere, ENN facilities are connected to about five million residential, commercial and industrial customers and the company is seeking supplies in order to connect additional customers residing in the provinces in which it has rights to distribute gas.
“ENN Energy is anticipating an estimated 30% increase in sales growth over the next several years,” Cheniere said. “ENN Energy plans to build as many as two LNG receiving terminals in China and is in the process of obtaining approvals from the administrative authorities for its identified sites.”
According to the U.S. Energy Information Administration, in 2009 China’s dry natural gas consumption was 3,075 Bcf.
Recently Chesapeake Energy CEO Aubrey McClendon said exporting U.S. gas as LNG would help rebalance the bloated North American gas market (see NGI, Nov. 8). LNG export is something he’s been talking about for a while.
“We make a great widget here, and it’s valued at ‘x’ here and ‘2x’ around the world, we have to figure out a way to get it on a boat with linkage to world prices…We are studying that right now. We have to have linkage for U.S. gas to world markets. And we’re dedicated to achieving that linkage,” McClendon said more than two years ago when he also hinted that his company was involved in LNG export plans (see NGI, Aug. 4, 2008).
Separately, Sabine Pass is talking with Morgan Stanley about import and liquefaction capacity at the terminal. Morgan Stanley could take about 20% of a proposed 7 million metric tons per year of liquefaction capacity at the terminal, Cheniere said. A Morgan Stanley spokesperson declined to comment.
Morgan Stanley would have the ability to export or import 1.7 mtpa of LNG from the proposed facility. The arrangement is subject to negotiation and execution of definitive agreements and other conditions, including regulatory approvals for the facility. The MOU does not represent a final and binding agreement, Cheniere said.
Cheniere Partners owns 100% of the Sabine Pass terminal, which has sendout capacity of 4 Bcf/d and storage capacity of 16.9 Bcfe.
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