LNG export terminal gets first major customer

The U.S. is one step closer to being an energy exporter once again.

Houston-based Cheniere Energy Partners said it has signed its first long-term customer to buy liquified natural gas for export from its Sabine Pass terminal on the Texas/Louisiana border.

The LNG sale and purchase agreement with a division of U.K.-based BG Group for 3.5 million tonnes per year of LNG over 20 years. Put another way, that’s 178 Bcf per year, or about 0.5 Bcf per day.

In the last decade several new LNG import terminals were built in the U.S., including Cheniere’s Sabine Pass facility, with the expectation the country would consume more natural gas than it produces.

The natural gas production boom that has occured in the last few years thanks to a combination of horizontal drilling and hydraulic fracturing has left the U.S. with a glut of natural gas, however.

In response, Cheniere and other LNG terminal operators have applied for licenses to export U.S. natural gas to overseas markets.

Cheniere’s Sabine Liquefaction subsidiary is planning to develop the ability to produce 9 million tonnes per year of LNG in the first phase of its project at the Sabine Pass Terminal.  The U.S. Department of Energy gave Cheniere approval for LNG export on May 20.

“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,” said Charif Souki, Chairman and CEO. 

Construction of the liquefaction facilities — which chill natural gas into a liquid form that is more compact for transport via tanker — is expected to start in 2012. The initial phase will include two liquefaction lines capable of producing 9 mtpa of LNG.  LNG exports could begin as early as 2015.   

Under the agreement, BG will pay Sabine Liquefaction a fixed sales charge for the full annual quantity and will also pay a contract sales price for LNG purchases based on the Henry Hub index price as traded on the New York Mercantile Exchange.