Cheniere Gets OK to Double LNG Export Capacity at Sabine Pass Facility

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Researched by Industrial Info Resources (Sugar Land, Texas)--Cheniere Energy (NYSE:LNG) (Houston, Texas) received approval from the U.S. Federal Energy Regulatory Commission (FERC) to start liquefaction and export activities at the Sabine Pass facility's Train 2 in Cameron, Louisiana. The OK was granted after FERC deemed that the train would operate safely. Trains 1 and 2, which fully completed construction in September, are expected to resume operations early next week. Industrial Info is tracking $10 billion in projects at the Sabine Pass facility, and more than $21 billion in other active projects involving Cheniere.

The two trains each are valued at $5.6 billion, and each produces 4.5 million tons per annum. Train 1 began exporting in February. Train 2 actually began producing LNG earlier this summer, while it was being commissioned. For more information, see Industrial Info's project report and August 12, 2016, article - Cheniere Clears Hurdles for Sabine Pass, Corpus Christi Projects, Banks on Better LNG Market.

The FERC approval effectively doubles the amount of shale-derived natural gas that is shipped from the U.S., for which Sabine Pass is the only active exporter. Recently, the global market for LNG has been vastly oversupplied; according to Bloomberg, it is expected to worsen through 2020 as demand from key Asian customers slows. Nonetheless, such exports have managed to reduce U.S. surplus and put Cheniere on the path to its first quarterly profit.

With the first two trains now active, Cheniere will begin obtaining fixed payments for the next 20 years from Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands), starting in December, and Natural Gas Fenosa (Madrid, Spain), starting in September 2017, according to Bloomberg. Both customers must pay Cheniere, regardless of whether they actually use the product.

The next three trains at Sabine Pass, each valued at $2.5 billion, are under construction. Trains 3 and 4 are expected to have capacities of 4 million tons per year each, and are scheduled to begin full operations in the second and third quarters of 2017, respectively; Train 5, also valued at $2.5 billion, is expected to produce 4.5 million tonnes, but will not be completed until the summer of 2018 at the earliest. For more information, see Industrial Info's project reports on Train 3, Train 4 and Train 5.

Last month, Cheniere announced the proposed, $2.5 billion Train 6 was fully permitted, although construction would not begin until the fourth quarter of 2017 and would not be completed for another three years, in the most optimistic scenario. Train 6 would produce 4.5 million tons per year, bringing the entire facility's production capacity to 24.5 million metric tons per year of LNG, assuming trains 3, 4 and 5 produce as expected. For more information, see Industrial Info's project report.

Cheniere has proposed another export facility for a different product: the $350 million crude oil and condensate terminal in Ingleside, Texas. As designed, the terminal would have a storage capacity of 3 million barrels, consisting of nine tanks, a five-bay truck rack and up to two marine docks, with a throughput of 1 million barrels per day. But the project remains in its design phase, as market forces have pushed back the construction kickoff date by more than two years since the project was first announced. For more information, see Industrial Info's project report.

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