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USA: Cheniere Urges FERC to Approve Sabine Pass Liquefaction Project

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Cheniere Energy of USA has urged Federal Energy Regulatory Commission (FERC) to approve construction of its Sabine Pass liquefaction project by Thursday to prevent any project delays.

In a letter sent to FERC, Cheniere said failure to receive FERC authorization by Thursday could result in delays in construction of the liquefaction project and significant price increases.

Cheniere 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, Sabine Liquefaction 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 16.0 mtpa of 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.

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

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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.

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