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Cheniere expects to expand US LNG plants: Correction

05 May 2017 12:04 (+01:00 GMT)
Cheniere expects to expand US LNG plants: Correction

Corrects start-up date of Sabine Pass train 4 in last paragraph

Houston, 5 May (Argus) — Cheniere Energy expects to expand its US LNG export capacity to capitalise on economies of scale from its two Gulf coast terminals already under construction.

Expansions at Cheniere's facilities would cost about $500-600 per metric tonne of annual production, significantly cheaper than greenfield projects because of the ability to use existing infrastructure, Cheniere chief executive Jack Fusco said during an earnings call.

"I feel good about our positioning relative to some of the [proposed] newer facilities, or wannabes, if you will," Fusco said.

The five liquefaction trains and associated facilities that Cheniere is completing at its Sabine Pass LNG terminal in Louisiana have an estimated cost of $20bn for peak capacity of 25mn t/yr, equivalent to 3.45 Bcf/d (98mn m³/d) of gas, for a unit cost of about $800 per tonne of annual production.

The estimated cost of the two liquefaction trains and associated facilities that Cheniere is building in Corpus Christi, Texas, is $10.5bn-11bn for combined peak capacity of 10mn t/yr, or $1,050-1,100 per tonne of annual production.

"We have recently acquired additional real estate positions to enable significant growth at both sites, with the expectation that our existing sites will remain advantaged relative to greenfield for the foreseeable future," Fusco added.

Cheniere has been authorised to build a sixth liquefaction train at Sabine Pass and a third at Corpus Christi, but it has not sold enough capacity to finance either proposed unit. A third train at Corpus Christi would be the lowest-cost LNG expansion along the US Gulf coast, Fusco said.

Low oil prices since mid-2014 have made it difficult for US LNG developers to sign long-term customer deals, as the economics of US LNG exports are based on a wide differential between domestic gas prices and global prices.

Six LNG export terminals are being built in the contiguous US with combined peak capacity of 73.5mn t/yr, almost equalling Qatari capacity of 77mn t/yr. Many industry observers expect a "second wave" of US LNG export projects will come on line in the early to mid-2020s, when a current global supply glut will likely recede. Cheniere is competing against dozens of other proposed projects to be part of that second wave.

Sabine Pass started exporting in early 2016, about two years ahead of other US projects, and in the first quarter Cheniere earned $1.1bn from LNG sales. The ramp-up of revenue will allow Cheniere to save up to $200mn per tonne of annual production in building new liquefaction trains, as the company will be less reliant on third-party financing, Fusco said.

Cheniere estimates that operating expenses for expansion trains will be about 30pc less than initial trains, and it will save $60mn-70mn/yr for each incremental train.

Cheniere in the first quarter became the largest single US gas consumer with the start of operations of Sabine Pass train 3, he said. Gas intake at the facility has averaged 2.18 Bcf/d so far this month.

Sabine Pass train 4 is on schedule to come line in the second half of 2017 and train 5 in the second half of 2019. Corpus Christi train 1 is on track to start operating in the first half of 2019 and train 2 in the second half of 2019.

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