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Cheniere to stop releasing US LNG contract details

28 Nov 2017 22:11 GMT
Cheniere to stop releasing US LNG contract details

Houston, 28 November (Argus) — Leading US LNG exporter Cheniere Energy will stop disclosing details of its future customer contracts after several years of revealing the data.

Houston-based Cheniere started exporting in February 2016 from its $20bn Sabine Pass LNG terminal in Louisiana and is building another $11bn export facility in Corpus Christi, Texas. Previously it publicly disclosed all the details of the 20-year contracts it signed to finance those projects, as the US Securities and Exchange Commission (SEC) requires the filing of publicly accessible copies of contracts that materially impact a publicly traded company's business. For Cheniere that included liquefaction fees ranging from $2.25-$3.50/mmBtu and its feed gas fees of 115pc of the final Nymex Henry Hub settlement price for a given month.

The SEC allows companies to request that some details of contracts remain confidential, however, if public disclosure of such information "can adversely affect a company's business and financial condition because of the competitive harm that could result from the disclosure," according to an SEC legal bulletin. Information that companies do not want publicly released typically includes pricing, technical specifications and milestone payments, the bulletin said.

"The days where we actually file a contract and not have redacted information in it are probably behind us," Cheniere chief executive Jack Fusco said on a recent earnings call. "This is a very competitive market and we view that as commercially sensitive."

Cheniere declined to comment further on the change.

Six LNG export terminals are being built in the contiguous US, but Cheniere was the only developer of those projects to have publicly released all its long-term contracts.

One of the other developers, Freeport LNG, is not publicly traded, even though its business is virtually entirely reliant on LNG, like Cheniere. The other developers, including Sempra Energy and Kinder Morgan, are larger and more diversified publicly traded entities that are not as materially impacted by LNG.

To receive confidential treatment from the SEC, a company cannot publicly disclose the relevant information. The company also must specify to the SEC why the disclosure would be commercially harmful and the requested duration of confidential treatment.

Some information cannot be given confidential treatment, including the identity of a 10pc customer, interest expenses and similar terms in a material credit agreement, the SEC bulletin said.

The steep fall in oil prices since mid-2014 has made it difficult for US LNG developers to sign new customer deals, since the economics of US LNG exports are based on a wide differential between domestic gas prices and global oil prices.

Cheniere has said it is offering lower liquefaction fees and shorter contracts to attract new customers, but it has declined to elaborate.

Cheniere last month signed a preliminary deal with state-owned China National Petroleum Corporation, while US President Donald Trump visited China. Fusco said on the earnings call he would not discuss that memorandum or any other contract in detail, as "the LNG market has become increasingly competitive."

Some developers of proposed US LNG export projects have become publicly listed to try to raise funds, so it is possible they will publicly release contracts they sign. One of those companies is Houston-based Tellurian, which was co-founded by former Cheniere chief executive Charif Souki and is developing the $15bn Driftwood LNG project near Carlyss, Louisiana.

"We do value transparency and we will be disclosing our contracts as required by the SEC," Tellurian told Argus. "We think that it enhances our competitiveness as customers know what they are getting."