BG Group to increase LNG volumes from Sabine Pass

Methane Shirley Elisabeth – credit BG Group and photographer Ken Childress
BG Group announced at the end of January that it had reached agreement with Cheniere Energy to purchase an additional 2 million tons of liquefied natural gas (LNG) over a 20-year period from the Sabine Pass terminal in Louisiana.

In October 2011, BG Group announced it had signed a fully-termed sale and purchase agreement (SPA) with Sabine Liquefaction for the purchase of 3.5 mtpa of LNG over a 20-year period. The additional volumes associated with today’s announcement have been incorporated into the SPA.

BG Group Chief Executive Sir Frank Chapman said: “The purchase of additional volumes from the Sabine Pass facility builds on the ground-breaking agreement we entered into last year, in which BG Group secured LNG export volumes from the US Gulf Coast.
“The agreement adds further volume to our diversified global LNG supply portfolio and is underpinned by the recent material increases in US gas reserves as well as a favourable long-term outlook for global LNG demand.”

Construction of the liquefaction facilities at Sabine Pass is scheduled to begin in 2012, with an initial phase of two LNG trains. Construction of the second phase, an additional two trains, is expected to commence in 2013, with exports from the initial phase to start as early as 2015 and for the second phase from as early as 2017.
“In assessing the optimal contracting strategy for the Sabine Liquefaction Project, we have decided to sell part of the additional volumes on a long-term basis to BG, our first foundation customer,” said Cheniere Chairman and CEO, Charif Souki. “There’s a trade-off in whether we sell the additional volumes on a long-term basis or in the open market. Contracting a portion of the additional volumes adds further certainty to the long-term cash flows of the project and preserves the opportunity for additional upside.”

At the same time, BG Group is pursuing an expansion of the Lake Charles LNG terminal, to provide natural gas liquefaction services. The US Department of Energy (DoE) has authorized the terminal to export up to 730 Bcf of natural gas per year (approximately 15 mtpa) to countries that have a free trade agreement in place with the USA.
The DOE is reviewing an application to export natural gas from the Lake Charles LNG terminal to countries that do not have a free trade agreement with the USA.

Details on Sabine Pass LNG…
Cheniere Partners owns 100 percent of the Sabine Pass LNG receiving terminal located on the Sabine Pass Channel in western Cameron Parish, Louisiana. The Sabine Pass terminal has regasification and send-out capacity of 4.0 billion cubic feet per day (Bcf/d) and storage capacity of 16.9 billion cubic feet equivalent (Bcfe).

Cheniere Partners is developing a project to add liquefaction and export capabilities to the existing infrastructure at the Sabine Pass LNG terminal. As currently contemplated, the Sabine Pass Liquefaction project is being designed and permitted for up to four modular LNG trains, each with a nominal capacity of approximately 4.5 mtpa. The Liquefaction Project is expected to be constructed in phases, with each LNG train commencing operations approximately six to nine months after the previous train. The first phase will include two liquefaction trains.

In November 2011, Sabine Liquefaction entered into a lump sum turnkey contract for the engineering, procurement and construction of the first phase of the Liquefaction Project with Bechtel Oil, Gas and Chemicals, Inc. Sabine Liquefaction has also entered into two long-term sale and purchase agreements for 7.7 mtpa, which are expected to underpin the financing of the first two trains. The customers are BG Gulf Coast LNG, LLC and Gas Natural Fenosa.

Commencement of construction for the first phase is subject, but not limited, to regulatory approvals and Cheniere Partners making a final investment decision. For the second phase of the Liquefaction Project, Cheniere is targeting contracts for a total of 8.3 mtpa of annual contract quantity. Cheniere has entered into sale and purchase agreements in connection with the second phase with GAIL (India) Limited for 3.5 mtpa and with BG for an additional 1.3 mtpa and continues to hold advanced discussions with additional global LNG buyers for the remaining 3.5 mtpa. Commencement of construction for the second phase is subject, but not limited to, entering into an engineering, procurement and construction contract, regulatory approvals and Cheniere Partners making a final investment decision.

So instead of being used as intended to be an LNG importation facility, it will be used for exports now? Do we really have that much natural gas now?

200 years worth apparently… all located in the Appalachians.