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Cheniere expects US will allow more LNG exports

13 Nov 2012, 10.16 pm GMT

Washington, 13 November (Argus) — A Cheniere Energy executive said today he believes the US administration is willing to allow more LNG exports than the license granted just to his company.

Energy companies have filed 15 applications with the Energy Department (DOE) to export LNG. But so far, DOE, which must determine whether exporting LNG would in the public interest, has approved only Cheniere's request to ship 2.2bn ft3/d (62mn m³/d) of gas equivalent from its Sabine Pass liquefaction project in Louisiana.

Cheniere began construction on the Sabine facility in August, with plans to export its first cargoes by late 2015.

Cheniere senior vice-president of marketing Davis Thames, speaking on the sidelines of the IHS Forum's Pacesetters conference in Washington, said he does not have a sense how much LNG US President Barack Obama's administration might be willing to allow.

“I have a belief that if people have a viable project, and they have got commercial agreements, have a certification to build and operate a place, it makes sense for the government to allow the export of LNG,” said Thames, who is also president of Cheniere Marketing.

“Obviously, if we have a national problem with availability of gas, it should not leave,” Thames said. “But otherwise, it is hard to see why not.”

Cheniere itself has hopes of developing a second LNG export terminal in Corpus Christi, Texas.

While DOE is in charge of permitting exports of natural gas from the US, the Federal Energy Regulatory Commission (FERC) has jurisdiction over all US natural gas interstate infrastructure. And obtaining FERC approval is a strong indication of a company's commitment to developing a project.

Cheniere already has spent $50mn already preparing its FERC application for the Corpus Christi facility and expects to spend another $50mn to complete that process, Thames told the conference.

The facilities are large and expensive. The process is lengthy, taking about nine years. But Thames said the investment is worthwhile when a company will earn $2.5bn/yr in earnings before interest, taxation, depreciation and amortization. Customers that have contracted for capacity at the Sabine Pass facility have agreed to pay $2.25-$3/mmBtu in reservation fees to Cheniere, in addition to a 15pc surcharge over the Henry Hub for the price of exports.

Thames said an issue is how many locations can handle an LNG export terminal. Before granting its approval FERC examines community support. “That is a first hurdle that has to be overcome,” he said.

The sudden abundance of natural gas in the US spurred by the shale revolution has prompted a debate about whether the US should grant more export licenses or retain the gas for the domestic market, to provide inexpensive heating fuel for consumers and to serve as a cheap feedstock for manufacturing.

DOE has delayed issuing any additional export licenses until a contractor completes a study on the economic ramifications of the US becoming a major LNG exporter. That report is expected to be released by the end of the year.

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