BG Gains 'First-Mover Advantage' in Securing Gulf Coast LNG Exports

BG Group has contracted for approximately 3.5 million tonnes per annum of liquefied natural gas (LNG) from Cheniere Energy Partners' Sabine Pass Terminal in Southwest Louisiana, both companies announced Wednesday.

"This is a ground-breaking agreement for BG Group, giving us first-mover advantage in securing LNG export volumes from the U.S. Gulf Coast," BG Group Chief Executive Sir Frank Chapman said in a written statement. "It is the first agreement of its kind in this region and it secures us early access to the rapidly emerging commercial opportunities driven by the recent material increases in U.S. gas reserves."

"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 Cheniere Chairman and CEO Charif Souki, describing BG a "strong foundation customer" for Cheniere's liquefaction project at Sabine Pass.

Under the terms of the 20-year sales and purchase agreement (SPA), BG's BG Gulf Coast LNG subsidiary has agreed to buy 3.5 mtpa of LNG from Cheniere's Sabine Pass Liquefaction subsidiary. Sabine Liquefaction will develop the ability to produce 9 mtpa of LNG in the first phase of its project at the terminal. In May of this year, the U.S. Department of Energy authorized Sabine Liquefaction to export up to 16 mtpa of LNG destined to countries with which trade is permissible.

Currently, Cheniere Partners' wholly owned Sabine Pass LNG import terminal in Cameron Parish, La., boasts 4 billion cubic feet per day of regasifaction and send-out capacity and 16.9 billion cubic feet equivalent of storage capacity. Cheniere Partners envisions adding up to four modular LNG trains at the site. Each train would have a nominal capacity of approximately 4.5 mtpa.

Construction of the liquefaction facilities at the terminal is slated to begin in 2012, and the initial phase will comprise two trains with a total LNG production capacity of up to 9 mtpa. BG Group indicated that it is not an investor in the proposed liquefaction facilities. Commercial deliveries, which under this deal would be transported on BG vessels, could begin in 2015.

Cheniere Partners' announcement Wednesday featured the following anticipated schedule for the Sabine Pass Liquefaction Project:

Milestone Target Date
DOE export authorization Received
Definitive commercial agreements 2H2011
EPC contract 2H2011
Financing commitments 2H2011
FERC construction authorization 2012
Commence construction 2012
Commence operations 2015/2016

Under the deal announced Wednesday, BG will pay Sabine Liquefaction a fixed sales charge for the full annual contract quantity. In addition, it will pay a contract sales price for LNG purchases based on the relevant Henry Hub index traded on the New York Mercantile Exchange.



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