Cheniere surprised at prices for Sabine Pass LNG
OREANDA-NEWS. Cheniere Energy has been surprised that LNG buyers have been willing to pay more than a European netback price to deliver spot cargoes from Louisiana's Sabine Pass LNG terminal to other parts of the world.
Before the first liquefaction train came on line in late February, Cheniere expected most Sabine Pass supplies to go to Europe because of weak spot prices in other parts of the world amid stagnant global demand, interim chief executive Neal Shear said yesterday at an opening ceremony at the terminal.
But so far, only one of the first six test cargoes has been sold to Europe, and that was to Portugal. The others have been sold to Brazil, Argentina, India and Dubai.
The seventh test cargo left yesterday on the Gaslog Salem vessel, which has capacity of 155,000m?, equivalent to 3.2 Bcf (91mn m?) of gas. Its destination is not yet known.
Liquid European gas markets, such as the UK, are widely seen as the current "sink" for LNG cargoes that do not have strong demand. European spot gas prices are the most competitive for spot LNG because of low prices in other parts of the world. European markets have available LNG storage and regasification capacity and can take cargoes sold at roughly the regional spot gas price, such as the National Balancing Point (NBP) in the UK.
The NBP was $4.34/mmBtu yesterday for delivery in May, while the Argus Northeast Asia (ANEA) assessment was $4.43/mmBtu for spot LNG delivered to northeast Asia in the first half of June. The ANEA 10?/mmBtu premium would be significantly less than the added cost of shipping US LNG to Asia rather than the UK.
For cargoes to go to other destinations, importers would have to pay more than the European transportation netback price, partly because of the extra shipping time.
Europe was expected to be "the market of last resort" and get most Sabine Pass cargoes during the current weak market. Cheniere has been surprised by "the global bid we didn't expect at the time of commissioning," Shear said.
If cargoes go to destinations other than Europe "you can assume it's going to be a better netback than for Europe," he added, declining to elaborate on the prices paid.
Cheniere is building five liquefaction trains at the $20bn Sabine Pass facility, which at the ceremony was described as the largest infrastructure investment in Louisiana's history. Each train will have baseload capacity of 4.5mn t/yr, equivalent to about 620mn cf/d of gas, and peak capacity of 5mn t/yr.
The first liquefaction train at Sabine Pass is expected send out up to eight test cargoes before Cheniere takes over operations of that train from contractor Bechtel in late April or early May. When that occurs, 3.5mn t/yr of the output will go to Shell under a 20-year deal. Cheniere has sold much of its available supplies in the coming years under short-term deals.
The second train is expected to start producing LNG soon, Shear said, without elaborating. It likely will produce a similar number of test cargoes as train 1, which Cheniere will probably sell into the spot market. Gas flows to the terminal have slowed in the last several days, with Sabine Pass expected to receive about 55mn cf today, compared with an average of 589mn cf/d on 1-25 April.
Cheniere plans to take over operations of train 2 in August and trains 3-4 about six months after the respective previous train. The contractually guaranteed completion date for train 5 is December 2019.
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