USA: Cheniere Wins Additional DOE Approval for LNG Export

Cheniere Energy Partners, L.P. announced that on May 20, 2011, its subsidiary, Sabine Pass Liquefaction, LLC, received an order from the U.S. Department of Energy (DOE) with authorization to export domestically produced natural gas from the Sabine Pass LNG terminal as liquefied natural gas (LNG) to any country that has, or in the future develops, the capacity to import LNG and with which trade is permissible.

This order expands upon the authorization Sabine Liquefaction received in September 2010, which authorized the exports of natural gas as LNG to all current and future Free Trade Agreement countries, and concludes one of the key regulatory requirements necessary for the Sabine Pass liquefaction expansion project.

Under the order, Sabine Liquefaction received long-term, multi-contract authority to export on its own behalf, or as agent for others, up to the equivalent of 803 Bcf per year (approximately 16 million metric tons per annum (mtpa)) of domestically produced natural gas as LNG. The authorization commences the earlier of the first export or five years from the date of issuance of the authorization. The authorization is conditioned upon the satisfactory completion of the FERC review process and upon Sabine Pass commencing export operations within seven years of the issuance of the order.

“This concluding authorization by the DOE is a significant milestone for our liquefaction expansion project at Sabine Pass that will transform our terminal into the first bi-directional LNG processing facility capable of importing and exporting LNG. Our terminal, designed with substantial operating flexibility and strategically located on the Gulf of Mexico, will provide customers the option to purchase or sell LNG from and to U.S. markets,” said Charif Souki, Cheniere Partners’ Chairman and CEO. “This is possible only because of the unique depth of the markets in the Gulf Coast, both on the production and consumption side; with approximately 30 Bcf/d of fully integrated physical supply, pipeline infrastructure, storage, and market delivery capability. With the unprecedented growth in unconventional reserves, supply of natural gas continues to outpace demand dramatically. There are currently an estimated 3,500 wells that have been drilled but not completed with the potential to continue to boost production. The U.S. has an opportunity to become a significant supplier in the global energy markets.”

Mr. Souki added, “The ability to export natural gas will further stabilize production for U.S. consumers, stimulate the economies through job creation and provide a boost to American global competitiveness. Exports will promote domestic production of U.S. energy and help reduce our country’s reliance on foreign sources. Additionally, exports will further advance public initiatives, such as improving the U.S. balance of trade, advancing national and foreign security interests by diversifying global natural gas supplies and replacing environmentally damaging fuels with a cleaner source. We look forward to being able to participate in such an important event for the U.S. and worldwide natural gas markets.”

Summary Project Update

Sabine Liquefaction will contemplate making a final investment decision to commence construction upon, among other things, entering into acceptable commercial arrangements, receiving regulatory authorization to construct and operate the liquefaction assets and obtaining adequate project and equity financing. Based on current estimates, construction is expected to commence in 2012 with operations commencing as early as 2015.

To date, Sabine Liquefaction has entered into non-binding MOUs for an aggregate of up to 9.8 mtpa of processing capacity, well exceeding the targeted capacity of 7.0 mtpa to complete the first two trains. Sabine Liquefaction has begun the process of converting the MOUs into definitive agreements whereby customers will secure their processing capacity under long-term take-or-pay contracts. For those customers that are still in preliminary discussions and have not signed an MOU, Sabine Liquefaction will proceed directly to negotiating definitive agreements. Given the level of interest in the project, Cheniere expects to construct all four trains with one train completed every six to nine months beginning in the first half of 2015.

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Source: Cheniere Energy Partners, May 21, 2011;