Cheniere closer to expanding Texas LNG site after China deal
(Reuters) - Cheniere Energy Inc said on Friday it has signed a deal to sell liquefied natural gas to China National Petroleum Corp (CNPC) from its Corpus Christi export terminal under construction in Texas, moving the top U.S. LNG company closer to expanding the site.
CNPC's PetroChina International Co Ltd subsidiary will buy about 1.2 million tonnes per year (MMtpy) of LNG under two agreements with a portion of the supply beginning in 2018 and the balance in 2023, Cheniere said.
The deal should move Cheniere to the top of the pack of companies competing to build the next generation of U.S. LNG terminals to meet potential supply shortfalls in the early 2020s, analysts said. The company is currently the only major exporter of LNG in the lower 48 U.S. states.
The agreements continue through 2043 for the purchase of LNG indexed to the U.S. natural gas Henry Hub benchmark price.
Cheniere has two 0.7 Bcfd (4.5-MMtpa) units under construction at Corpus Christi and one at Sabine Pass, in addition to the four 0.7 Bcfd liquefaction trains in operation at Sabine Pass.
Cheniere also has other units that are fully permitted at both Sabine Pass and Corpus Christi, including train 3, that it plans to build once it obtains enough financial commitments.
"We have a very large platform at two separate sites in Texas and Louisiana and a lot of existing infrastructure. It's a tough platform to compete with and we ought to be able to grow it," Michael Wortley, Cheniere's CFO, told Reuters in a phone interview.
Cheniere's Sabine Pass terminal in Louisiana is currently the only big LNG export facility operating in the country. Several other companies are building other trains at six sites which is expected to make the United States into the third biggest LNG exporter by capacity in 2018.
Total U.S. export capacity is expected to rise to 4.6 Bcfd by the end of 2018 and 9.4 Bcfd by the end of 2019 from 3.0 Bcfd now.
While many companies are competing to build the next generation of U.S. LNG export terminals, the combination of the CNPC deal and a deal announced in January to sell LNG to Swiss commodity trader Trafigura puts Cheniere in the lead.
"Since Cheniere has had a proven successful track record they are an attractive seller to these new buyers," said Jason Lord, LNG analyst at energy data provider Genscape in Boulder, Colorado.
One Bcfd can fuel about 5 million U.S. homes.
Analysts at Cowen & Co said in a note that Cheniere should generate about $4 billion in discretionary cash flow through 2021, enough to finance the roughly $2.5 billion cost to build train 3 at Corpus without project financing.
Cheniere shares were up 4.6 percent at $55.57 on Friday.
(Reporting by Scott DiSavino in New York; Editing by Matthew Lewis and Marguerita Choy)
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At October’s HPI Forecast Breakfast for our sister publication, <i>Hydrocarbon Processing</i>, I shared <i>Gas Processing</i>’s forecast on change in the LNG industry.
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The shale gas boom established the US as the world’s leading natural gas producer and is responsible for billions of dollars of investments in the US gas processing industry. Since 2012, the US has witnessed unprecedented growth in new gas processing capacity and infrastructure. This rise is due to greater production of domestic shale gas, which is providing cheap, available feedstock to fuel the domestic gas processing, LNG and petrochemical industries. New gas processing projects include the construction of billions of cubic feet per day of new cryogenic and gas processing capacity, NGL fractionators, multi-billion-dollar pipeline infrastructure projects, and the development of millions of tons per year of new LNG export terminal construction. Attend this webcast to hear from Lee Nichols, Editor/Associate Publisher, Hydrocarbon Processing, Scott Allgood, Director-Data Services, Energy Web Atlas and Peregrine Bush, Senior Cartographic Editor, Petroleum Economist as they discuss the future of LNG and the application of Energy Web Atlas, a web-based GIS platform which allows users to track real-time information for every LNG project.
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