Sabine Liquefaction Project Clears FERC Hurdle

The U.S. Federal Energy Regulatory Commission (FERC) has granted Cheniere Energy Partners, L.P. authorization to site, construct and operate facilities to liquefy and export domestically produced natural gas at the Sabine Pass LNG terminal in Cameron Parish, La., Cheniere Partners announced Monday.

"Obtaining approval from the FERC is one more milestone for our Liquefaction Project," said Cheniere Chairman and CEO Charif Souki in a company statement.

"We will now finalize the financing arrangements in order to commence construction of the first two LNG trains of our Liquefaction Project promptly."

FERC's order authorizes the development of up to four modular LNG trains at Cheniere Partners' 100-percent owned Sabine Pass LNG terminal, which is located on the Sabine Pass Channel in the southwestern corner of Louisiana. Each train would possess a nominal capacity of 4.5 million tons per annum (mtpa). Currently, the Sabine Pass boasts 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 anticipates building each liquefaction train 6 to 9 months after the previous train. Construction could begin as soon as the second quarter of this year, with operations commencing in 2015/2016. Last November, Cheniere Partners' Sabine Liquefaction subsidiary awarded Bechtel Oil, Gas and Chemicals, Inc. a lump sum turnkey contract for the engineering, procurement and construction (EPC) of the first two trains.

Sabine Liquefaction has also entered into four long-term customer sale and purchase agreements (SPA) for 16.0 mtpa of LNG volumes -- equating to approximately 89 percent of the nominal LNG volumes. The customers include BG Gulf Coast LNG, LLC (5.5 mtpa); Gas Natural Fenosa (3.5 mtpa); KOGAS (3.5 mtpa) and GAIL (India) Ltd. (3.5 mtpa). The BG and Gas Natural Fenosa SPAs commence with the start of operations for trains 1 and 2, respectively. Cheniere Partners said that construction of the first two trains hinges on, among other things, obtaining financing and making a final investment decision.

In a related announcement Monday, Cheniere Partners said that it has engaged eight financial institutions to act as joint lead arrangers to assist in structuring and arranging of up to $4 billion of debt facilities. Proceeds would pay for the costs of developing and constructing the first two trains as well as funding the acquisition of the Creole Trail Pipeline from Cheniere Energy, Inc. for general business purposes. Cheniere Partners estimates $4.5 to $5.0 billion in pre-financing capital costs for trains 1 and 2 that would be funded with debt and equity.

"Obtaining financing is one of the last steps to complete before proceeding with the construction of the first two liquefaction trains being developed at the Sabine Pass LNG terminal," said Souki. "We have engaged an experienced group of financial institutions as our core banking group and look forward to completing the financing for the project in due course."

The eight arrangers are The Bank of Tokyo-Mitsubishi UFJ, Ltd., Credit Agricole Corporate and Investment Bank, Credit Suisse Securities (USA) LLC, HSBC, J.P. Morgan Securities LLC, Morgan Stanley, RBC Capital Markets, and SG Americas Securities, LLC.
The KOGAS and GAIL SPAs will commence with the start of operations for trains 3 and 4, respectively. Construction of these trains, which could begin next year, would follow milestones including entering into an EPC contract, obtaining regulatory approvals, obtaining financing and making a final investment decision. Trains 3 and 4 could begin operations in the 2017/2018 time frame.

Cheniere Partners has posted various documents related to the Sabine Liquefaction Project on its website.

Cheniere Partners estimates the project will support 3,000 jobs during the peak of construction and 150 jobs during operations at all four trains.


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