Cheniere and BG Sign 20-Year LNG Sale and Purchase Agreement (10/26/11)

HOUSTON, Oct. 26, 2011 /PRNewswire via COMTEX/ --

Cheniere Energy Partners, L.P. ("Cheniere Partners") (NYSE Amex: CQP) announced today that its subsidiary, Sabine Pass Liquefaction, LLC ("Sabine Liquefaction"), has entered into its first liquefied natural gas ("LNG") sale and purchase agreement ("SPA") with BG Gulf Coast LNG, LLC ("BG"), a subsidiary of BG Group plc, under which BG has agreed to purchase 3.5 million tonnes per annum ("mtpa") of LNG. Sabine Liquefaction is planning to develop the ability to produce 9 mtpa of LNG in the first phase of its project at the Sabine Pass Terminal owned by Cheniere Partners. On May 20, 2011, Sabine Liquefaction received authorization from the U.S. Department of Energy to export up to 16 mtpa of LNG destined to all countries with which trade is permissible.


Under the agreement, BG will pay Sabine Liquefaction a fixed sales charge for the full annual contract quantity and will also pay a contract sales price for LNG purchases based on the applicable Henry Hub index traded on the New York Mercantile Exchange. LNG will be loaded onto BG's vessels. The SPA has a term of twenty years commencing upon the date of first commercial delivery, and an extension option of up to ten years. LNG exports are expected to commence as early as 2015. The SPA is subject to certain conditions precedent, including but not limited to Sabine Liquefaction's receiving regulatory approvals, securing necessary financing arrangements and making a final investment decision to construct the liquefaction facilities.

"BG is one of the largest participants in the global LNG markets and will be a strong foundation customer for our Sabine Pass liquefaction project," said Charif Souki, Chairman and CEO. "Entering into this agreement is a significant milestone for our project and we look forward to finalizing additional commercial agreements and proceeding with the development of the first two trains."

 

http://phx.corporate-ir.net/phoenix.zhtml?c=101667&p=irol-newsA...=

 

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Replies to This Discussion

Permalink Reply by essay on October 26, 2011 at 6:48

yup yup.  can't wait.

Cheniere Energy, Inc.  

(Public, AMEX:LNG)

9.75 +3.63 (59.31%)
 
Permalink Reply by Henry on October 26, 2011 at 13:00
I cannot relate to 3.5 million tonnes of LNG.  Is there an easy way to convert that to our usual metric of mcf?
Permalink Reply by jffree1 on October 26, 2011 at 13:38
If anybody knows how... it will be Les B.
Permalink Reply by essay on October 26, 2011 at 14:10

the all seeing eye of google knows!   http://www.extension.iastate.edu/agdm/wholefarm/html/c6-89.html

 

1 million metric tons LNG = 48.7 billion cubic feet NG

 

so, (3.5x48700000000)/1000= 170,450,000 mcf per annum

 

i think i did that right if somebody wants to check my math

 

also, i think this comes in right under 500,000 mcf/d

Permalink Reply by Les Bamburg on October 26, 2011 at 14:39
Henry, Essay is close with his estimate.  Converting million tonnes per year to an equivalent gas rate is variable since it depends on the specific composition.  An approximation is 1 MMTPA is equivalent to ~ 137.5 MMcfd of natural gas.  So 3.5 MMTPA would be ~ 480 MMcfd.  This is LNG and depending upon fuel consumption at Sabine Pass may require ~ 525 MMcfd of feed gas.  By the way BG's current share of Haynesville Shale production is 500+ MMcfd.
Permalink Reply by Henry on October 26, 2011 at 23:40

Les an essay,

 

Thanks.  So getting this back to something I can relate to....  It means that 3.5 million tonnes per year of export is the equivalent to either 170 Bcfe of gas/year or 500 mmcfe/day.

 

The first metric translates into total output from about 30 good Haynesville wells (EUR = 5.5 Bcfe).  The second would translate into the first-year production from about 100 good Haynesville wells (1.5 - 2.0 Bcfe in year 1).  So, in other words, this is a great start, but there is a lot more that could be exported.

Permalink Reply by Les Bamburg on October 27, 2011 at 2:44
Jay, this is more based on the wide spread between oil prices and US natural gas prices since most international gas sales are crude oil (or petroleum product) indexed.  Potential markets include Asia also where new contracts equate to ~ $15.00/MMBtu at a $100/Bbl oil price.  
Permalink Reply by Spring Branch,mineral owner on October 27, 2011 at 2:59
Seems that taking that gas away from our market here can only help, not hurt our gas price. Looks to me that just about all of BG's annual Haynesville production would be exported under the deal.
Permalink Reply by Les Bamburg on October 27, 2011 at 3:06
SB, that would be true assuming Exco/BG elect to maintain production at current levels versus continuing to grow production.
Permalink Reply by Les Bamburg on October 27, 2011 at 2:55

Henry, the 3.5 MTPA would require ~ 3,833 Bcf of gas reserves to supply the 20 contract (525 * 365 * 20 / 1000).  Using your 5.5 Bcf EUR would require 697 Haynesville Shale wells.

 

In contrast, BG's CBM project in Australia would require ~ 2,500 wells to provide the same amount of natural gas.

Permalink Reply by baddog on October 27, 2011 at 3:21

The calculations discussed in the comments used the initial contract volume of 3.5 million tonnes per year.  Notice there are plans for almost 3x that in capacity and the permit was for more than 4x that amount.  So, there is potential for export of gas from approximately 2,000-3,000 wells.  Now we're talking!!!

Permalink Reply by w.r. frank on October 27, 2011 at 7:55

See:

 

http://seekingalpha.com/article/302423-cheniere-s-8b-deal-may-be-th...

 

Another comment to this link stated:

 

Cheneire also has MOUs with eight other companies to provide up to 80% of total capacity of 19 mtpa:

Endesa - 1.5 mtpa (million tons per annum)
Lithuania - 1.5
Basic Energy - 0.6
Sumitomo - 1.5
EDF Trading - 0.7
Femosa - 1.5
ENN - 1.5
Morgan Stanley - 20% of capacity (assume 3.2, if total is 19 mtpa is built out).

With the 3.5 to BG yesterday, the total is 15.5 mtpa; they can build three of the trains and if they firm commitments from the above, should be able to obtain financing fairly quickly (already have money from an SPO to begin) and this should happen like dominoes.

 

Now, if true, you are talking real volume demand creation!!!

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