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Cheniere Expects To Ship First US LNG Export Cargo In January

Cheniere Energy Inc. (NYSE: LNG) expects to start receiving natural gas to convert into super-chilled liquid fuel at its first U.S. LNG export terminal before the end of the year, with shipments to start in January, its chief executive said on Oct. 26.

Cheniere’s plant will mark the first exports of cheap and abundant U.S. shale gas as LNG, adding to a huge boost in output out of Australia as well.

The ample supplies, combined with slowing growth in China and falling demand in top importers Japan and South Korea, have cut prices and prompted a battle for market share.

First natural gas supplies will arrive at its U.S. LNG plant this year, CEO Charif Souki told reporters on the sidelines of Singapore International Energy Week.

“We will ship our first cargo sometime in January,” he said.

Spot LNG prices in Asia have tumbled by half from a year ago, narrowing the gap with U.S. benchmark prices. Tracking the plunge in energy prices, Cheniere’s shares are down by almost half from their peak in 2014.

Once Cheniere’s first LNG plant starts up, the company will have a new production train starting up every six months until mid-2019, leaving it with seven total lines of gas liquefaction at its Sabine Pass project in Cameron Parish, La., and at another terminal in Corpus Christi, Texas.

The seven trains will account for almost half of the 65 million tonnes per year of LNG export capacity under construction in the United States.

Cheniere has sold most of its 31.5 million tonnes per year of LNG via long-term contracts, with about 4 million tonnes per year remaining for sale in spot markets, Souki said.

The company plans to start offering a cargo a month from December, he said, hoping this will improve market liquidity.

The company is permitted to build another two trains, but has yet to take investment decisions.

The current pricing structure is not a strong argument for building further LNG plants, Souki said, with any projects needing at least $8 per million British thermal units (MMBtu) to sell to Europe and $9 per MMBtu to sell to Asia.

“I’m pretty sure the market will come back,” he said, however, adding that Cheniere has applied for permits to build more trains.

“You don’t make a decision like this based on what’s happening in the next six months. You make a decision based on what you think is going to happen over the next 20 years.”

For any trains beyond the seven that have been committed to, Cheniere would not have to sell the gas until 2020-21, Souki said, giving it time to wait until LNG prices recover.

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