Cheniere – the undisputed leader in the race to develop large-scale exports from the Unites States – is pushing forward with the fifth and sixth trains at its Sabine Pass project. Last month the company made a formal application to the Federal Energy Regulatory Commission (FERC), fulfilling a forecast it made early this year, for approval to site, construct and operate the two trains.
The company also applied to the Department of Energy (DoE) for a licence to export volumes from the two trains that are not already covered by earlier applications. It has asked for a licence for countries that have a Free Trade Agreement (FTA) with the US as well as non-FTA countries, a category that covers most of the major LNG importers – South Korea being an exception.
First and largest: With four trains already under construction, and most of the volumes from the first five trains already covered by commercial agreements, there seems little doubt that Cheniere is on a trajectory that will make it not just the first and largest exporter of LNG from the lower 48 states in the US, but one of the largest producers of LNG in the world.
If all six of the proposed 4.5 mtpa trains come to fruition, Cheniere will have production capacity of an astonishing 27 mtpa. Most of this is scheduled to come on stream well before the end of the decade. Moreover, the company is also working on another project, Corpus Christi, which would be a green-field development – unlike Sabine Pass, which is a conversion of an existing regasification facility.
Cheniere remains the only company to have taken a final investment decision (FID) and begun construction on a Lower 48 LNG export project. Indeed, it is still the only company to have gone through the time-consuming and expensive process of getting FERC approval (for its first four trains). CEO Charif Souki (pictured above) claims the process can cost up to $100 million and take between 18 months and two years. Applicants have to be accepted for a pre-filing process that takes a minimum of six months before they can make a full formal application to the commission, which can then take up to 18 months.
“First-mover” advantage: Earlier this year, when Cheniere made its pre-filing request to the FERC , Souki said: “We expect to complete all of the required resource reports to file an application with the FERC by September.” The fact that the company has managed to stick to that timetable is a good indication of how determined it is to get its projects up and running – and to fully exploit its “first-mover” advantage.
Earlier this year Cheniere announced that Total had signed up to take gas volumes equivalent to 2 mtpa from the fifth train over a period of 20 years from when the train starts up. Soon afterwards, the company announced a deal with UK-based Centrica for a further 1.75 mtpa, again for 20 years from project start-up, which Souki claims could be “as early as 2018”.
Centrica said that under the terms of its sales and purchase agreement (SPA), it will pay Cheniere a fixed fee of $3.00/MMBtu for liquefaction capacity and a commodity fee of 115% of the prevailing Henry Hub price for the procurement and liquefaction of the gas.
The customers for the LNG from the first four trains are: BG (5.5 mtpa), Gas Natural Fenosa (3.5 mtpa), Korea Gas Corporation (3.5 mtpa) and Gail (India) (3.5 mtpa). Sabine Pass Liquefaction (SPL) has also entered into an SPA with Cheniere Marketing for up to 2.0 mtpa of LNG that is not already committed to third parties.
Exports from train 5 “by 2018”: In its DoE application, Cheniere says: “SPL anticipates that construction of train 5 of the liquefaction project will commence by November 2014, with approximately 50 months required for the completion and start-up. SPL anticipates that exports will commence as early as December 2018, and requests authorisation to export for a term of 20 years. Construction and start-up of Train 6 would begin when commercially feasible.”
As we reported last month, the DoE has so far given non-FTA export licences to four projects: Sabine Pass, Freeport LNG, Lake Charles and Dominion Cove Point. The Cove Point approval for 0.77 Bcf/d took the total volume of gas approved for LNG exports to non-FTA countries to 6.4 Bcf/d, above the psychologically significant 6 Bcf/d threshold. That was the lower limit considered in a study by the Energy Information Administration published as part of the process of studying the economic impacts of large-scale LNG export from the US.
Next in the long queue of projects waiting for a DoE export licence determination is Freeport LNG. It will be very interesting to see what the DoE has to say, not just in whether it gives approval or not – but the rationale behind its decision, whatever it turns out to be.
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