Cheniere ramps up new LNG strategies

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Gas Processing talks to Cheniere Energy Senior Vice President Katie Pipkin about the company’s expansion plans and the future outlook for LNG markets.

GP. How does your partnership with Parallax fit into your plans for LNG capacity expansion?

Katie Pipkin: Parallax is a group we are partnering with, and they are developing two mid-scale projects with an expected capacity of 10 MMtpy. The projects include Live Oak LNG, which is situated on the west side of Louisiana, and Louisiana LNG, which is situated on the east side of Louisiana.

These projects are being designed with a different technology and on a smaller scale than our current projects. Due to their expected lower cost and modular design, we should have more flexibility in terms of development and financing, which, in turn, would give us the ability to offer customers more flexible contract terms than what are required for the large-scale projects. [...]

GP. What are the target markets for Cheniere’s LNG sales?

Katie Pipkin: We have a variety of customers under long-term contracts. For example, for Sabine Pass, we have six customers for our five trains, including BG Group Plc, which is a big gas marketer, as well as Spain-based Gas Natural Fenosa, India-based GAIL, Korea-based KOGAS, France-based Total and UK-based Centrica.

Each of these companies might deliver their LNG to their home markets or sell to markets elsewhere. According to our permits, gas can go to any country with which the US has trade relations. Overall, it seems that most of the LNG will be going to Asia and Europe.

GP. Do you have other avenues for sales in addition to these long-term contracts?

Katie Pipkin: Yes, we have a Cheniere gas marketing operation as well. Our excess LNG, or LNG that is not sold under long-term contracts, is available to our marketing group to sell. For example, if we look at the nine liquefaction trains being developed at the Corpus Christi and Sabine Pass LNG facilities, on a combined basis, about 80% of that capacity will be sold under long-term contracts and 20% will be available for sale through our marketing group. Cheniere Marketing has strategically located offices in the UK, Singapore and Chile. LNG will be primarily sold under shorter terms and various pricing mechanisms through this business.

GP. That brings a lot of benefit to the US and its energy economics.

Katie Pipkin: It does. It is important to us to partner with our local communities as we develop our projects, and we are very appreciative of the support we have received in return. In addition to providing jobs and state revenue, we have developed programs that give back to the local community, such as our Craft Development Program, which recruits exiting military graduates, high school graduates and technical school students into a program designed to provide specialized training in advanced welding programs. We expect the Sabine Pass project to create 400 new direct jobs, and the Louisiana government estimates the project will result in 1,569 new indirect jobs in southwestern Louisiana. In total, we calculate that our LNG production platform of 60 MMtpy will create over 200,000 indirect jobs, including E&P and construction jobs. [...]

GP. What is different in the LNG market, from back when you announced your first LNG export project, compared to today? 

Katie Pipkin: When we announced our first LNG export project back in 2010, we had planned to develop two trains at Sabine Pass, with the ability to expand to four depending on customer interest. We signed the first sale and purchase agreement in October 2011 and had the first two trains contracted by November 2011. Customer interest was significant, so not only did we move forward with the additional trains at Sabine, but we also decided to add another liquefaction project at our Corpus Christi site. We knew that LNG market demand was strong, but I would say that it increased at a faster pace than we originally anticipated. Since our announcement, other companies have followed suit, and other liquefaction projects are also being developed in the US. What’s really different today is that the US will become one of the largest LNG suppliers in the world next to Qatar and Australia.

GP. Does Cheniere have any other new expansion plans?

Katie Pipkin: We have proposed future development plans beyond liquefaction projects. We are working on other opportunities to export other liquid hydrocarbons. We believe our niche is in exports, and that expanding our exporting capabilities into other liquids would be a natural next step. We have obtained property near our Corpus Christi liquefaction project along the Gulf of Mexico for a future development site. We are also interested in developing other midstream projects that would be a vertical or horizontal integration into our existing platform.

To read the full interview by Gas Processing, click here

Wednesday, November 18th at 11am: Jean Abiteboul, President at Cheniere Supply & Marketing will be speaking at the EAGC about “United States: LNG Supply & Impact on EU Security of Supply”.

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