Blog Archives

Blackstone to Invest $2 Billion in Cheniere Energy in Bet on LNG Expansion

image

By Jim Polson – Feb 27, 2012 7:49 AM CT

Cheniere Energy Partners LP (CQP) said Blackstone Group LP (BX) agreed to invest $2 billion toward construction of a $5 billion natural-gas export terminal.

The financing is a “significant milestone” toward Cheniere’s plan to build the plant, Chairman and Chief Executive Officer Charif Souki said in a statement today. If built, the plant would be the first constructed in more than four decades to export U.S. natural gas by ship.

Cheniere Energy is seeking final approval from the Federal Energy Regulatory Commission for the plant, which would liquefy gas for export from its existing import terminal in Cameron Parish, Louisiana. The Houston-based company obtained Energy Department approval to export after U.S. production of the fuel surged from hydraulic fracturing.

“Obtaining this financing will be a significant milestone for the advancement of construction for the first two liquefaction units,” Charif Souki, chairman and chief executive officer of Cheniere Energy Partners and its parent, Cheniere Energy Inc. (LNG), said in today’s statement.

The Blackstone entities have agreed to buy 111 million new senior subordinated paid-in-kind units for $18 billion each, according to the statement. Final terms are contingent on Cheniere securing debt financing.

Starting Construction

Cheniere expects to obtain the remaining financing by March 31 and to begin construction by June 30, according to the statement.

The units that Blackstone is buying will pay 4.2 percent interest quarterly and convert to partnership common units once the first two sections of the plant begin commercial operation. Cheniere Energy Partners will use cash from the sale to buy the pipeline that connects the terminal to the U.S. gas pipeline network from Cheniere Energy Inc., according to today’s statement.

The announcement was made before regular trading began on U.S. markets. Cheniere Energy Partners rose 6.7 percent to $22.30 at 8:46 a.m. in New York. Cheniere Energy Inc. rose 17 percent to $16.42.

Source

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

image

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.

Source

USA: Sabine Pass LNG Gets Cargo

image

The U.S. Sabine Pass liquefied natural gas terminal received an LNG cargo yesterday, according to shipping data.

The Arctic Spirit, owned by Teekay LNG, has a capacity of 87.305 cbm.

Cheniere’s Sabine Pass LNG terminal  is located on 853 acres of land along the Sabine Pass River on the border between Texas and Louisiana, in Cameron Parish.

It  has regasification and send-out capacity of 4.0 billion cubic feet per day (Bcf/d) and storage capacity of 16.9 billion cubic feet equivalent (Bcfe).

Articles

Source

USA: Cheniere, KOGAS Ink Sabine Pass LNG Deal

image

Cheniere Energy Partners, L.P. said today that its subsidiary, Sabine Pass Liquefaction, LLC, has entered into a LNG sale and purchase agreement (SPA) with Korea Gas Corporation (KOGAS) under which KOGAS has agreed to purchase approximately 3.5 mtpa of LNG upon the commencement of train three operations.

Under the SPA, KOGAS will purchase LNG on an FOB basis for a purchase price indexed to the monthly Henry Hub price plus a fixed component. LNG will be loaded onto KOGAS’s vessels. The SPA has a term of twenty years commencing upon the date of first commercial delivery for train three, and an extension option of up to ten years.  Deliveries from train three are expected to occur as early as 2017.  The SPA is subject to certain conditions precedent, including but not limited to Sabine Liquefaction receiving regulatory approvals, securing necessary financing arrangements and making a final investment decision to construct the second phase of the liquefaction project.

KOGAS is our fourth foundation customer and we have now sold 16 mtpa of the 18 mtpa being developed at the Sabine Pass LNG terminal.  KOGAS is a strong addition to our portfolio of customers as it is the largest LNG importer in the world and the dominant gas provider for the Republic of Korea, a nation that is soon to become a Free Trade Nation with the U.S.” said Charif Souki, Chairman and CEO.We look forward to finalizing all necessary steps in order to begin construction of the first phase of our project early this year and more importantly, to becoming the first LNG exporter in the Continental U.S.

Articles

Source

USA (Sabine Pass): BG Ups Sabine Pass LNG Volumes to 5.5 MTPA

image

Cheniere Energy Partners, L.P. announced today that its subsidiary, Sabine Pass Liquefaction, LLC , has entered into an amended and restated LNG sale and purchase agreement with BG Gulf Coast LNG, LLC, a subsidiary of BG Group plc, under which BG has agreed to purchase an additional 2.0 million tonnes per annum (mtpa) of LNG, bringing BG’s total annual contract quantity to 5.5 mtpa of LNG.

BG will purchase 3.5 mtpa of LNG with the commencement of train one operations and will purchase a portion of the additional 2.0 mtpa of LNG as each of trains two, three and four commence operations.

Under the SPA, the purchase terms essentially remain the same, whereby BG will pay Sabine Liquefaction a fixed sales charge for the contracted quantity and will pay a contract sales price for LNG purchases based on the applicable Henry Hub index traded on the New York Mercantile Exchange, with the exception that the fixed sales charge will increase ratably in order to account for the increased fixed sales charge on the additional volumes.

In assessing the optimal contracting strategy for the Sabine Liquefaction Project, we have decided to sell part of the additional volumes on a long-term basis to BG, our first foundation customer,” said Charif Souki, Chairman and CEO.  “There’s a trade-off in whether we sell the additional volumes on a long-term basis or in the open market.  Contracting a portion of the additional volumes adds further certainty to the long-term cash flows of the project and preserves the opportunity for additional upside.

Articles

Source

GAIL to buy 3.5 million tonnes of LNG from U.S. firm

image

by Sujay Mehdudia

“It will ensure long-term gas supply to meet demand in India

In a major step aimed at meeting India’s energy security requirements, state-run Gas Authority of India Limited (GAIL) on Sunday announced that it signed an agreement to buy 3.5 million tonnes a year of liquefied natural gas (LNG) for 20 years from a U.S. firm.

“GAIL has signed a sales and purchase agreement [SPA], for supply of LNG over 20 years, with Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, LP, the United States, for supply of 3.5 million tonnes per annum of LNG,” the company announced it in a statement here. The supplies may start as early as 2016.

“Under the SPA, GAIL will pay Sabine Liquefaction as per contractual provisions on a Henry Hub (U.S. gas benchmark) basis after transfer of custody on FOB. LNG will be loaded onto GAIL’s vessels,” the statement said.

The 20-year term would commence upon the date of first commercial delivery, and there was an extension option of up to 10 years. The LNG from Sabine Pass shall form a part of the basket for feeding LNG to Dabhol terminal in Maharashtra and Kochi in Kerala.

GAIL chairman and managing director B.C. Tripathi said: “The SPA with Cheniere will help GAIL to ensure long-term gas supply for the growing demand in the Indian market. This will be in addition to other initiatives being undertaken by GAIL, which includes building captive LNG facilities in India and augmenting its transmission capacity from 175 million standard cubic metres a day to over 300 msmcd over the next two years.”

“Charif Souki, chairman and CEO, said GAIL would join BG and Gas Natural Fenosa as the next foundation customer for our Sabine Pass liquefaction project,” he said.

GAIL is India’s leading natural gas company and its largest shareholder is the government of India.

“We are building a strong portfolio of customers, consisting of energy companies engaged in natural gas, LNG and power markets with operations spanning the globe. We continue to hold advanced discussions with additional global LNG buyers and expect to complete commercial discussions for the remaining capacity of the second phase of the project in the coming weeks,” he added.

The LNG would be supplied from four of the Sabine Pass LNG receiving terminal located on the Sabine Pass Channel in western Cameron Parish, Louisiana. The Sabine Pass LNG terminal project is being developed by Sabine Liquefaction and would include up to four liquefaction trains capable of producing up to 18 mtpa of LNG. The project is being developed in phases with each LNG train commencing operations approximately six to nine months after the previous train. Sabine Liquefaction recently announced that it had reached its targeted annual contract quantity of 7 mtpa for the first phase and was advancing towards making a final investment decision for the development and construction of the first two liquefaction trains.

“The SPA is subject to certain conditions precedent, including, but not limited to, Sabine Liquefaction receiving regulatory approvals, securing necessary financing arrangements and making a final investment decision to construct the second phase of the liquefaction project,” the statement said.

Source

Soc Gen Says China May Look for US LNG Deals in Future

image

China may look to buy US LNG volumes in the future as an alternative to buying more gas from Russia, one European gas analyst said.

Soc Gen analyst Thierry Bros said in a report Tuesday that, with US Gulf Coast LNG expected to materialize in 2016, China will likely first look into a potential US LNG deal before signing a gas supply agreement with Gazprom.

The bank estimates the minimum breakeven cost for US Gulf Coast LNG delivered into China, taking shipping into account, would work out at around $11.6/MMBtu. This allows plenty of room for negotiations between companies selling US LNG and the Chinese from $13.50/MMBtu — which would allow a minimum of 15% return on investment — and $22/MMBtu — which takes into account full oil indexation — Societe Generale added.

The $13.5 to $22/MMBtu negotiation range translates into a price of oil between $77/b and $133/b, or an oil-indexation formula with a slope between 0.10 and 0.17. This is large enough to match a Russian pipe-gas oil-index price,” Bros said.

As a result, Societe Generale believes China will prefer to look further into US LNG rather than rely on securing an agreement with Gazprom, which could further delay negotiations between Russia and China.

Judging by the seeming lack of any progress in the gas pricing issue during [Russian Prime Minister Vladimir] Putin’s recent visit to China, it seems Beijing is in no particular hurry to sign the contract,” Bros said.

In 2006, Moscow and Beijing signed an initial agreement on gas supplies, when they agreed to construct two pipelines to transport a total of 68 billion cubic meters/year of gas from Russia to China over 30 years. Gazprom and China’s state-owned CNPC in 2010 subsequently signed a legally binding agreement on the supply of up to 30 Bcm/year.

Negotiations since then have not gone as smoothly and have been bogged down by pricing disagreements. Putin’s recent visit to Beijing in October didn’t resolve any of those issues although he said the parties were “on their way to the final stage of negotiations.”

The report published by Societe Generale comes in response to the latest agreement between Cheniere Energy Partners’ Sabine Pass Liquefaction unit in the US and Gas Natural Fenosa announced on Monday.

Under the LNG-sale-and purchase agreement, Gas Natural Fenosa would buy as much as 3.5 million mt/year of LNG. The deal is expected to help facilitate the construction of the first two liquefaction trains at the site, which would produce 9 million mt/year of LNG in the first phase. Construction of the two trains at Sabine Pass is estimated to begin in 2012.

(platts)

Source

Gas Natural Fenosa Deals with Cheniere Energy to Buy US Shale Gas Sourced LNG

image

Gas Natural Fenosa has entered into a deal with US based Cheniere Energy to buy 3.5 million tonnes per year (mtpa) of liquefied natural gas from the US based company’s Sabine Pass facility by 2016.

Gas Natural Fenosa will pay Cheniere about $454 million per year for use of the terminal, construction of which could begin in 2012. It will buy LNG at a 15 percent premium to U.S. benchmark futures at Henry Hub.

The move marks the second large deal for Cheniere, taking it a step closer securing construction financing that would allow it to export U.S. shale gas globally.

In October, Cheniere announcing that it had signed a 20-year agreement to supply liquefied natural gas from US shale gas with BG Group, under which it would export 3.5 million tonnes a year of liquefied natural gas from Sabine Pass terminal, at a cost of 115% the US price plus $2.15 per million British therms.

Cheniere plans to refit its existing Sabine Pass gas import terminal in Louisiana to be able condense to and ship over 800 billion cubic feet of gas per year of domestically produced supply.  The project would be the first bi-directional LNG processing facility capable of importing and exporting LNG.

Sabine Pass opened in 2008 as a terminal to take in natural gas shipments from overseas. Fearing a US gas shortages, Cheniere and other companies had built gas-import terminals during the past decade.

However, a surge in natural gas production from shale gas fields changed US market dynamics, reducing the need for imports.

In September 2010, Cheniere received US government permission to ship gas to 15 countries with which the US had free trade agreements. An additional authorization in May 2011, extended permission to all US trading partners.

Gas Natural Fenosa is one of the leading multinational companies in the gas and electricity sector, operating in more than 25 countries,. It is the largest integrated gas and electricity company in Spain and Latin America, leading the natural gas sales market in the Iberian Peninsula, and it is the biggest distributor of natural gas in Latin America.

Source

%d bloggers like this: