It is all about LNG exports at U.S. player Cheniere

This year was very successful for Houston-based LNG player Cheniere. The company has signed several LNG deals for its Corpus Christi liquefaction project in Texas, and the construction on its Sabine Pass four liquefaction trains is well underway.

In an interview with LNG World News, Jean Abiteboul, President of Cheniere Supply & Marketing, discusses the company’s plans for the future, U.S. LNG competitiveness, as well as the impact of the shale boom.

Can you update on the current construction progress at the Sabine Pass liquefaction project, and when do you expect first LNG from Train 1 and 2?

“Construction on the Sabine Pass Liquefaction Project, on a consolidated EPC basis, is progressing well with Stage 1 (Trains 1 and 2) project about 72% complete, and Stage 2 (Trains 3 and 4) approximately 38.5% complete.

We expect to make first LNG from Train 1 in late 2015, with commercial deliveries to commence in early 2016. Subsequent Trains are expected to come online in 6-9 month increments.”

Cheniere aims to make an FID for the Corpus Christi project in January next year. This year the company signed multiple contracts for the liquefaction project, and the capacity of Train 1 and Train 2 is fully booked. Is the company still targeting January 2015 for an FID, and can you tell us something more about these contracts that were signed this year?

“We continue to target early 2015 for FID of the Corpus Christi Liquefaction Project, subject to receipt of final regulatory approvals and securing necessary financing.

The SPAs signed thus far on Corpus Christi demonstrate the continued strength in a global demand for price-competitive LNG. The US. buyers – be they end-users or portfolio players – continue to value the contract flexibility and time visibility that few other global LNG projects can offer.”

Recently you said at a conference in Amsterdam that the impacts of U.S. LNG exports have already started, what did you mean by that?

“Two examples: without waiting for the start-up of US LNG deliveries, some „traditional“ suppliers have already adapted their price formula to take into account this new competition.

Moreover, the coal, which has been displaced by shale gas for the power generation in the USA, has been exported to Germany and has displaced natural gas for the power generation in this country, which is a kind of „synthetic“ export of US gas price.”

What is your opinion on the pricing of future LNG exports from the U.S. if you look at the liquefaction costs and transport distance?

“I believe that, given the reserves and the potential production of US shale gas, and also due to the fact that a significant part of this gas, associated with oil and liquids, is „stranded“, the Henry Hub should remain at a very reasonable level.

If you add to this price the cost of liquefaction (say, 3.5 USD/MMBTU), and the cost of transportation (between 1 USD/MMBTU for Europe and 3 USD/MMBTU for Asia), US LNG should remain competitive. It also seems to be the opinion of our customers.”

How do you see U.S. LNG export impacting domestic gas prices?

“Comprehensive independent third-party studies which address this question continue to conclude that the domestic gas market can absorb incremental demand from LNG export.

Evidence suggests that an upward movement in domestic gas prices would be met with an offsetting growth in production.”

Any new projects, developments for Cheniere in the future?

“We continuously evaluate growth project opportunities. While we are not yet in a position to disclose anything publicly, thematically we continue to be interested in avenues to exploit the US energy export opportunity, utilizing key core competencies we have developed as a company through the Sabine Pass and Corpus Christi developments.

In addition, as we prepare for startup at Sabine Pass, we continually evaluate smaller-scale investment opportunities related to improving the efficiency of our integrated operation.”