Adds Cheniere comments.
The US Federal Energy Regulatory Commission (FERC) has approved a proposed expansion of the Sabine Pass LNG export terminal in Louisiana that would increase peak liquefaction capacity by 50pc to 30mn t/yr, equivalent to 4.14 Bcf/d (117mn m³/d) of gas.
Sabine Pass will be the first major LNG export project in the contiguous US to come on line, with the initial test cargo expected to be sent out late this year and commercial operations scheduled to start in February 2016. The owner of the terminal, Houston-based Cheniere Energy, is building four liquefaction trains with peak capacity of 20mn t/yr.
The expansion would add two trains. Cheniere has already sold a combined 3.75mn t/yr of capacity at $3/mmBtu from train 5 for 20 years and expects that train to come on line as early as 2018. It has not sold any capacity from train 6 and has said that train would come on line when commercially feasible.
Cheniere plans to make final investment decisions on trains 5 and 6 in the first half of this year. Train 5 likely will be built even at current low oil prices, as France's Total has subscribed for 2mn t/yr of capacity and would pay Cheniere $314.3mn/yr, while UK firm Centrica would pay $273.8mn/yr for its capacity of 1.75mn t/yr.
Total and Centrica would have to pay those fees whether they take LNG or not. If they want LNG, they would pay an additional 115pc of the Nymex Henry Hub monthly settlement price for a month in which a cargo is scheduled.
Cheniere said low oil prices have not made it more difficult to market capacity from train 6. At oil prices of about $50/barrel, Asian LNG consumers pay about $7-$7.50/mmBtu for delivered LNG under most existing oil-indexed contracts, significantly less than the expected delivered price of US LNG of $10-$12/mmBtu at Henry Hub prices of $3-$5/mmBtu. However, Asian customers may still want to subscribe to long-term US LNG capacity if they believe price dynamics could change and to diversify their supply portfolios.
Four major US LNG export terminals are being built, and expansions at such facilities likely would have economic advantages over construction of new export facilities at existing LNG import terminals or greenfield sites.
Cheniere has not disclosed the estimated cost of trains 5-6, but the cost of trains 1-4 is about $11.5bn.
FERC also approved an expansion of the 94-mile (151km) Creole Trail pipeline to allow up to 3 Bcf/d of gas to flow south from the regional grid to the terminal. The pipeline was originally built to send regasified LNG north into the grid from the Sabine Pass import facility, and is being modified to flow up to 1.5 Bcf/d south for trains 1-4.
Sabine Pass would use a combined 4.5 Bcf/d of gas if all six trains operate at full load. Each train would process about 0.7 Bcf/d, for a potential total of 4.2 Bcf/d, with the rest of the gas to be used for on-site power generation and pipeline transportation.
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