Cheniere Unit Wins US Approval To Export LNG From Louisiana
May 20 2011 - 5:29PM
Dow Jones News
A subsidiary of Cheniere Energy Inc. (LNG) won approval Friday
from U.S. regulators to export liquefied natural gas around the
world from a terminal in Sabine Pass, La.
The permit, which allows Cheniere to sell super-chilled gas to
any country that would have it, complements a previous
authorization to export gas to countries that have a free-trade
agreement with the U.S., such as Mexico and Canada. Cheniere said
last fall that it was working on a deal to supply a Chinese natural
gas company with LNG.
Cheniere said that in addition to its potential deal with a
subsidiary of China-based Enn Energy Trading Co., it has reached
tentative agreements to supply gas to companies in Japan, Spain,
Italy, France and the Dominican Republic as well as a potential
pact with investment bank Morgan Stanley to trade the gas.
News of the export permit sent Cheniere's stock soaring. Shares
closed up 30.56% at $10.04.
Obstacles remain, however.
The deals with buyers still must be finalized, and most
importantly, Cheniere still has to build a liquefaction terminal.
The facility it owns at Sabine Pass was built to receive and reheat
liquefied gas, not to chill it to 260 below zero Fahrenheit for
transport. The company has estimated it would cost $6 billion to
build the new infrastructure.
Cheniere said Friday that it hopes to begin construction in 2012
and begin exporting gas culled from the high-yielding fields that
dot the Gulf Coast in the first half of 2015.
Though Cheniere does not have supply agreements with producers,
Chesapeake Energy Corp. (CHK) officials have said their company
could provide Cheniere with some of the gas it would need.
Chesapeake is the second-largest natural gas producer in the U.S.
after Exxon Mobil Corp. (XOM).
The U.S. has seen its gas shortage turn into a glut as producers
learned in recent years to unlock deeply buried energy-bearing
rocks. Demand in Asia, meanwhile, is on the rise. And natural gas
prices there are tied to the price of oil, meaning that gas that
costs $4 per million British thermal units in Louisiana could fetch
up to three times as much overseas.
The project, despite the hurdles it faces, has strong support
from federal and local officials.
"Our long-term economic strength depends on safely and
responsibly harnessing America's domestic energy resources while
developing new and innovative clean energy technologies," said U.S.
Energy Secretary Steven Chu in a statement. "This project reflects
a broad, 'all of the above' approach that will put Americans to
work producing the energy the world needs."
U.S. Sen. Mary Landrieu, D-La., on Friday called the project a
"precedent-setting breakthrough that will bring substantial
economic benefits to southwest Louisiana."
The Sabine Pass project wouldn't be the first natural gas export
facility in the U.S., but the only existing facility, in Alaska, is
in the process of being mothballed.
-By Ryan Dezember, Dow Jones Newswires, 713-547-9208,
ryan.dezember@dowjones.com;
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