Cheniere Clears Hurdles for Sabine Pass, Corpus Christi Projects, Banks on Better LNG Market

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Researched by Industrial Info Resources (Sugar Land, Texas)--A global overabundance of liquefied natural gas (LNG) is diminishing prices and proving tricky for Cheniere Energy (NYSE:LNG) (Houston, Texas), which began exporting the product earlier this year. Although the company lost just shy of $300 million in the second quarter of 2016, compared with a loss of about $118 million in the same period last year, executives expressed optimism in a quarterly earnings call that demand for LNG would strengthen in coming years and the company's long-term agreements with customers will begin to pay off in spades. Industrial Info's project database is tracking $36.8 billion in active Cheniere projects, all but $1 billion of which are located at the Sabine Pass and Corpus Christi facilities in Texas.

"While the market for LNG is loose at the moment, we expect it to start tightening between late this and early next decade, and for LNG demands to nearly double between now and 2030," said Anatol Feygin, the senior vice president for Strategy & Corporate Developments, in the earnings call. "While traditional LNG buyers like Japan and Korea have been importing less, the rapid emergence of new market entrants -- such as Egypt, Jordan, Pakistan -- has more than made up the difference, and there are currently about 30 new markets considering LNG import projects."

Revenues for the quarter stood at $177 million, about $111 million of which was from LNG sales.

One of Cheniere's most widely anticipated projects passed a series of milestones earlier this year: the $5.6 billion trains 1 and 2 at its Sabine Pass LNG Production Plant in Cameron, Louisiana, are now producing LNG, with the second beginning production at the end of July, and both set to be fully completed late in the third quarter. Each train will produce 4.5 million tons per year, with a natural gas inlet capacity of 2 billion cubic feet per day. For more information, including project specifications, equipment requirements and contractor contact information, see Industrial Info's project report.

Michael Wortley, chief financial officer and senior vice president, said in the earnings call that Cheniere loaded 11 cargoes and sold more than $200 million worth of LNG produced at Sabine Pass during the second quarter. To date, Cheniere has exported 22 cargoes from Sabine Pass, with LNG shipped to customers in South America, Europe, Asia and the Middle East, among other places.

Cheniere also is at work on the next four trains at Sabine Pass, each valued at $2.5 billion. Trains 3 and 4 each are designed to have a 4 million-ton-per-year capacity, while trains 5 and 6 are expected to produce 4.5 million tons per year. Citing "lagging construction progress," executives said they had pushed the estimated completion date for Train 3 from April to June 2017, but added that Train 4 still has an August 2017 completion date. Train 5 will not be completed until mid-2018 at the earliest, while Train 6 still is in the planning stage; in July, Train 6 received approvals from the Federal Energy Regulatory Commission (FERC) and U.S. Department of Energy (DOE) to export its product, regardless of the destination's Free Trade Agreement (FTA) status. For more information, including project schedules and environmental requirements, see Industrial Info's project reports on Train 3, Train 4, Train 5 and Train 6 at Sabine Pass.

The company also is planning a September maintenance outage at Sabine Pass for roughly four weeks to "facilitate a design change with our process flares." Additional routine maintenance will be addressed as well.

"As the trains enter into commercial operations, we expect to fulfill our contractual obligations to our long-term foundation customers," said Jack A. Fusco, the president, chief executive officer and director of Cheniere, in a conference call. "Cheniere will continue to optimize our excess cargoes, and our marketing efforts are focused on building a portfolio of short-, mid- and long-term contracts. And we will continue to pursue long-term contracts necessary to support the financing of our next trains, Corpus Christi 3 and Sabine Pass Train 6."

Cheniere's LNG production and export facility in Corpus Christi, Texas, also has seen significant progress, particularly at the two trains that are under construction: the $5.5 billion Train 1 and the $5.5 billion Train 2, each of which will produce 4.5 million tons per year, with a natural gas inlet capacity of 1 billion cubic feet per day. The company has received all required regulatory permits and entered into long-term contracts with Endesa Chile (NYSE:EOC) (Santiago, Chile) and other investment-grade companies, for a total of 8.42 million tons per annum. (Endesa's is one of the largest, at 1.5 million tons.) These take-or-pay agreements are worth $1.5 billion in annual fixed fees for 20 years. For more information, see Industrial Info's project reports on Train 1 and Train 2.

The next three trains at Corpus Christi, each valued at $3 billion, are designed to have capacities identical to the first two trains. However, only Train 3 has received FERC and DOE approval. For more information, see Industrial Info's project reports on Train 3, Train 4 and Train 5 at Corpus Christi.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.