Cheniere delays first Sabine Pass LNG export

HOUSTON — Cheniere Energy has delayed the first export of liquefied natural gas from its Sabine Pass plant by about one month until late February or early March, the company announced Thursday.

The shipment, which was originally secluded to depart near the end of January, is still slated to be the first cargo of liquefied gas to sail from the continental United States.

While Cheniere remains ahead of its competitors, the international markets it’s racing to serve have been roiled by a crush of liquefaction capacity due online in 2016 and sluggish demand for the fuel.

A one-month delay isn’t likely to mean much for the company or the market, said Bob Ineson, a global LNG specialist at consulting group IHS.

“It’s not huge,” he said. “When you look at the conditions in the global market, it’s pretty well supplied.”

In a statement disclosing the delay Thursday, the Cheniere said the holdup was due to “instrumentation issues” discovered during the final phases of plant commissioning. Engineering and construction firm Bechtel Corp. is building Sabine Pass and will handle the fix in the coming weeks, the company said.

“With construction of Train 1 finished, we remain well ahead of the guaranteed contractual schedule with Bechtel and anticipate no issues in meeting all contractual targets and guaranteed completion date,” said Neal Shear, interim president and CEO of Cheniere, in a written statement.

Cheniere’s $18 billion Sabine Pass project is designed to include up to six liquefaction trains, which cool natural gas into a more easily transported liquid. If completed as planned, the facility will have the ability to process about 3.5 billion cubic feet of natural gas per day into LNG.

The company began construction on the first two Sabine Pass LNG trains in August 2012 and the second two in May 2013. The fifth, which has a slightly smaller capacity, broke ground in June 2015, while the sixth train is awaiting the final go-ahead. Cheniere has contracted out the rights to use capacity on those trains, meaning its revenue will be mostly secure whatever the value of the natural gas that passes through its system.

Several other large liquefaction plants have marched toward completion in the U.S. and abroad. On Monday, ConocoPhillips announced its $17 billion Australia Pacific LNG plant had shipped its first cargo of coal seam gas to a customer in Asia.

In the U.S., several large LNG plants are due to come online after Cheniere’s Sabine Pass. Those include are another massive Cheniere LNG venture in Corpus Christie and others from competitors such as the Freeport LNG project underway at Quintana Island, Texas.

Combined, there are about 60 million tons per annum of LNG capacity — very roughly about 8 billion cubic feet per day of natural gas processing capacity — under construction in the U.S., according to numbers compiled earlier this year by consulting group Wood Mackenzie. Internationally, there are about 140 million tons per annum or 20 billion cubic feet of capacity in the works, a huge increase for the existing market international market of 250 million tons per annum.

And since all of those projects will compete to find buyers for their LNG, the outlook for LNG prices isn’t rosy, said Michelle Foss, head energy economist at the University of Texas’ Bureau of Economic Geology.

“For some period of time its just going to be very, very tough market,” she said.

SHOW MORE

About The Author