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USA: Cheniere CEO Sees Domestic Gas Prices at USD 2/MMBtu

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In an interview on E&ETV yesterday, Cheniere CEO Charif Souki said that domestic natural gas prices could drop to $2 per million British thermal units as a result of improved drilling technologies, regardless of whether LNG exports are increased.

The rationale is this is no longer an exploration play. We know where the resource is. This is now a technology play. Technology plays become better, not worse.

We are learning how to image better, so we know where we have to drill. Our drill bits are getting better, so we know how to manage them and get them to the right place faster and better with less intrusion.

John Berge was talking last week about being able to reduce the amount of water used in the fracking process by 80 percent over the next few years. So, this is going to become a better and better process,” he said.

“We’re very early in the learning curve and we’re going to be able to find this resource more easily, faster and cheaper over a long period of time.

Whatever we can do to export is not going to be sufficient to make any impact at all. Most of the studies talk about 20 cents, I would propose that 20 cents statistically is insignificant, because gas prices can go up or down 20 cents every week. So, over a 20 year period, if our impact by modeling is 20 cents, that’s fine,” he added.

Cheniere of USA is developing a project to add liquefaction and export capabilities to the existing infrastructure at the Sabine Pass LNG terminal.

The Liquefaction Project is being designed and permitted for up to four modular LNG trains, each with a nominal capacity of approximately 4.5 mtpa.

In November 2011, Sabine Liquefaction, a unit of Cheniere, entered into a lump sum turnkey contract for the engineering, procurement and construction of the first two trains of the project with Bechtel Oil, Gas and Chemicals.

Sabine Liquefaction has also entered into four long-term customer sale and purchase agreements for 16 mtpa of LNG volumes, which represents approximately 89 percent of the nominal LNG volumes.

The customers include BG Gulf Coast LNG for 5.5 mtpa, Gas Natural Fenosa for 3.5 mtpa, KOGAS for 3.5 mtpa and GAIL (India) for 3.5 mtpa.

LNG World News Staff

Cheniere: Sabine 1,2 Train Construction Start in H1 2012 (USA)

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Cheniere Energy Partners reported a net loss of $7.5 million and $31.0 million for the quarter and year ended December 31, 2011, compared to a net loss of $2.7 million and net income of $107.6 million for the same periods in 2010.

For the year ended December 31, 2011, affiliate revenues decreased $116.3 million primarily as a result of the assignment of the terminal use agreement (TUA) in June 2010 from Cheniere Marketing to Cheniere Energy Investments, the company’s wholly owned subsidiary, which required Cheniere to eliminate for consolidated reporting purposes the TUA revenues under this contract to Sabine Pass LNG.

Overview of Significant Events

During 2011, Sabine Pass Liquefaction made significant progress on the liquefaction project being developed at the Sabine Pass LNG terminal, including the following:

  • received an order from the U.S. Department of Energy (DOE) with authorization to export domestically produced natural gas from the Sabine Pass LNG terminal as LNG to any country that has, or in the future develops, the capacity to import LNG and with which trade is permissible;
  • entered into a lump sum turnkey engineering, procurement and construction (EPC) agreement with Bechtel Oil, Gas and Chemicals for the first two LNG trains and related facilities at the Sabine Pass LNG terminal for a contract price of $3.9 billion, which is subject to adjustment by change order; and
  • sold an aggregate of approximately 10.5 million mtpa of LNG per year under three long-term LNG sale and purchase agreements (SPAs) which commence upon the date of first commercial delivery for the applicable LNG train.

During 2011, Cheniere received approximately $69.0 million in net proceeds through equity issuances, including:

  • approximately $9.0 million during the year from the sale of 0.5 million common units through an at-the-market (ATM) program; and
  • approximately $60.0 million in September 2011 from the sale of 3.0 million common units in an underwritten public offering and the sale of approximately 1.1 million common units to Cheniere Common Units Holding.

As of February 2012, Sabine Liquefaction has contracted additional volumes under SPAs and has now sold approximately 16.0 mtpa of LNG, or approximately 89% of the expected nameplate liquefaction volumes that will be available upon the completion of the liquefaction facilities. The fixed fee component for the SPAs equates to a range between $2.25 per million British thermal units (MMBtu) and $3.00 per MMBtu and, in aggregate, the fixed fee component from all four SPAs totals approximately $2.3 billion annually.

2011 Results

Cheniere Partners reported income from operations of $37.0 million and $144.6 million for the quarter and year ended December 31, 2011, respectively, compared to income from operations of $40.7 million and $280.8 million for the comparable periods in 2010.

Total revenues for the quarter and year ended December 31, 2011, were $70.8 million and $283.8 million, compared to total revenues of $72.1 million and $399.3 million for the comparable periods in 2010. Total revenues primarily include capacity payments received from customers in accordance with Cheniere’s TUAs and incremental revenues from tug services and re-export fees. Revenues from affiliates for the year ended December 31, 2011, decreased by $116.3 million when compared to the comparable period in 2010 due to the assignment of Cheniere Marketing’s TUA to Investments, partially offset by revenues from the variable capacity rights agreement (VCRA) with Cheniere Marketing.

Total operating costs and expenses for the quarter and year ended December 31, 2011, were $33.8 million and $139.2 million, respectively, compared to $31.4 million and $118.5 million for the comparable periods in 2010. Development expense (including affiliate) increased $25.9 million for the year ended December 31, 2011, compared to 2010, primarily due to expenses related to the proposed Liquefaction Project. Operating and maintenance expenses (including affiliate) decreased $5.4 million for the year ended December 31, 2011, compared to 2010, primarily due to decreased fuel costs as a result of efficiencies in our LNG inventory management.

Liquefaction Project Update

Cheniere continues to make progress on its Liquefaction Project, which is being designed and permitted for up to four liquefaction trains, each with a nominal production capability of approximately 4.5 mtpa. Cheniere anticipates LNG exports from the Sabine Pass LNG terminal could commence as early as 2015, with each liquefaction train commencing operations approximately six to nine months after the previous train.

Cheniere is advancing towards making a final investment decision on the first two liquefaction trains, which is subject, but not limited to, obtaining regulatory approval from the Federal Energy Regulatory Commission (FERC) and obtaining financing. Cheniere estimates that the costs to construct the first two liquefaction trains will be approximately $4.5 billion to $5.0 billion, before financing costs. The company expects to finance the first two liquefaction trains with a combination of debt and equity. Construction is expected to commence in the first half of 2012.

Commencement of construction for liquefaction trains 3 and 4 is subject, but not limited to, regulatory approvals, entering into an EPC agreement, obtaining financing and making a final investment decision. Sabine Liquefaction has engaged Bechtel to complete front-end engineering and design work and to negotiate a lump sum turnkey contract. Construction for LNG trains 3 and 4 is targeted for early 2013.

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USA: Societe Generale Says Cheniere Can Make Sabine Pass Export Decision After Fenosa Deal

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Societe Generale today said that Cheniere Energy can take a final investment decision on phase 1 of its Sabine Pass LNG export project after it has yesterday signed a supply deal with Gas Natural Fenosa, Bloomberg reported.

This latest deal should allow construction of the liquefaction facilities, two trains capable of producing up to 9 million tons a year, at Sabine Pass to commence in 2012”, Societe Generale said in a report.

Gas Natural Fenosa has yesterday agreed to buy 3.5 million tonnes per annum (mtpa) of LNG from Cheniere Energy. The first LNG deliveries are expected to commence in 2016.

Source

USA: Cheniere Enters into Contract with Bechtel

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Cheniere Energy Partners, L.P. announced today that its subsidiary, Sabine Pass Liquefaction, LLC, and Bechtel Oil, Gas and Chemicals, Inc. (Bechtel) have entered into a lump sum turnkey contract for the engineering, procurement and construction of the first two liquefaction trains at the Sabine Pass LNG terminal located in Cameron Parish, Louisiana

Sabine Liquefaction is planning to construct liquefaction facilities capable of producing 9.0 million tonnes per annum (mtpa) of liquefied natural gas (LNG) in the first phase of its project and selling 7.0 mtpa of the production under long-term sales and purchase agreements (SPA).  To date Sabine Liquefaction has contracted half of such production under a long-term, 20-year SPA with customer BG Gulf Coast LNG, LLC, and will make a final investment decision upon contracting the remaining 3.5 mtpa.  Sabine Liquefaction intends to give Bechtel a notice to proceed with construction for the first phase upon achieving acceptable financing arrangements and receiving authorization to commence construction from the FERC.  Construction is expected to begin in 2012 with LNG exports expected to occur as early as 2015.

Bechtel will design, construct and commission two liquefaction trains using the ConocoPhillips Optimized Cascade® technology.  This is a proven technology deployed in several LNG projects around the world.  The liquefaction trains will be built next to the existing facilities at the Sabine Pass LNG terminal, which include five tanks with storage capacity of 16.9 billion cubic feet equivalent (Bcfe), two docks that can handle vessels up to 265,000 cubic meters and vaporizers with regasification capacity of 4.0 billion cubic feet per day (Bcf/d).  Cheniere Partners anticipates that over 3,000 construction workers will be employed at peak construction and up to 100 permanent jobs will be created once the liquefaction facilities are operational.

The total contract price of the EPC Contract is $3.9 billion.  Total expected costs for the project before financing costs are estimated to be between $4.5 billion and $5.0 billion, including an estimated $0.6 billion to $1.0 billion for owner’s costs and contingencies.

Bechtel was chosen to develop and construct our liquefaction facilities due to their extensive LNG capabilities and experience in building some of the world’s largest LNG production facilities.  Our trains are being designed with the best combination of efficiency, cost, and reliability, and with the turndown capability needed to provide flexible LNG delivery programs,” said Charif Souki, Chairman and CEO.  ”We have worked with Bechtel in the past on the construction of our existing Sabine Pass LNG terminal, which was completed on time and on budget, and look forward to another successful project.

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