Cheniere plans to expand US LNG exports

Cheniere Energy plans to expand its US LNG export business by developing two more major liquefaction trains and mid-scale liquefaction projects, it told Argus.

The Houston-based company previously announced plans to build up to nine major liquefaction trains, with six of those at its Sabine Pass terminal in Louisiana and three at its Corpus Christi project in Texas.

A 10th and an 11th train would be built at one of those facilities, but Cheniere officials declined to name the location. Cheniere plans to make a final investment decision (FID) in the second half of 2017 on the two trains, which have an estimated combined cost of $10bn. They would start operating in 2021-22.

Cheniere plans to raise $7.5bn in debt financing for the trains, with the remaining $2.5bn to come from equity. It plans to sell long-term liquefaction capacity totaling 7mn t/yr at $3.50/mmBtu to finance the trains.

Cheniere's large trains each have baseload capacity of 4.5mn t/yr, equivalent to 621mn cf/d (17.6mn m³/d) of gas, and peak capacity of 5mn t/yr.

Because of the expense of building large trains and associated facilities, Cheniere needs to sell an adequate amount of liquefaction capacity on a take-or-pay basis for 20 years to finance a particular train.

Cheniere can market any remaining LNG on its own and expects to have combined capacity of about 9mn t/yr from the first nine trains at Sabine Pass and Corpus Christi. It plans to sell one-third of those supplies under long-term contracts of 10-20 years, on a delivered cost basis; one-third under medium-term contracts of less than 10 years; and one-third on a spot basis, a company official told Argus last week on the sidelines of the IHS-CERA's annual energy conference in Houston.

Cheniere has signed sales agreements totaling a gas equivalent of about 150 Bcf for delivery in 2016-18, but the official declined to elaborate. Cheniere has chartered three LNG vessels for five years, beginning this year and in 2016.

Cheniere is also exploring opportunities to develop mid-scale LNG projects of 2mn-4mn t/yr, potentially by partnering with other developers. Such projects are expected to have lower unit costs by using modular technology built off-site. Mid-scale projects can cost as little as about $1bn for 4mn t/yr of capacity, Cheniere chief executive Charif Souki said last week at the conference.

Such smaller projects could be built on a speculation basis and would not necessarily need to sell long-term capacity like Cheniere's large trains, Souki added. That could be important if foreign buyers exhaust their appetite for long-term US liquefaction capacity.

Cheniere is building the first four trains and associated facilities at Sabine Pass at a cost of $13bn. The first export is scheduled for late this year and all four trains are expected to start operating in late 2017.

Cheniere has sold 3.75mn t/yr of capacity at $3/mmBtu from the planned train 5 at Sabine Pass and expects to make an FID on that $4.5bn project in mid-2015, with operations to begin in 2019. It expects to make an FID on the $3bn train 6 at Sabine Pass in the second half of 2015 after selling long-term capacity totaling 1.5mn t/yr at $3.50/mmBtu, providing Cheniere with 3mn t/yr of capacity. Train 6 is scheduled to start operating in 2020.

Cheniere has sold 7.65mn t/yr of capacity from the planned first two trains at Corpus Christi and plans to make an FID on those trains as soon as it gets all regulatory approvals, which it expects to occur this quarter. Corpus Christi trains 1-2 are scheduled to start operating in 2019-20.

The company wants to sell 2.85mn t/yr of capacity at $3.50/mmBtu to finance the third train at Corpus Christi, which would give it 1.7mn t/yr of its own supply to market. It expects to make an FID in the second half of 2015 and bring the train on line in 2021.

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