Cheniere expects first LNG cargo in the coming weeks from Sabine Pass
Cheniere Energy (ticker: LNG, Cheniere.com) expects to load the first shipment of liquefied natural gas for export from the U.S. in the coming days. A LNG tanker docked in Cheniere’s Sabine Pass terminal Sunday as the company prepares to send the first cargo from the U.S. by the end of this month, or early next month, according to ship tracking data from Reuters.
The tanker, the Asia Vision, arrived in the Gulf of Mexico in January, but anchored off the coast of the terminal after the first shipment was delayed due to mechanical problems at the Sabine Pass facility. The company cited problems with plant commissioning and cool-down instrumentation for the delay.
“We will export the first cargo shortly. Touch wood, it’ll be at the end of February or in early March,” said Cheniere Vice President for Strategy Andrew Walker during an energy industry event in Germany last week.
In a note to investors, Raymond James cautioned that while the first cargo represents an excellent PR opportunity, it is not the important detail to watch. “The pace of production ramp-up is hard to predict until the plant begins to operate, and the timing of the first cargo just doesn’t mean much in the grand scheme of things,” the note said. “What is technically termed ‘substantial completion’ is targeted for Train 1 in late April/March and Train 2 in August.”
Australia’s Gorgon LNG project set to start exporting
The first shipment from another major LNG export project is expected leave Australia’s shores in the coming days as well. The $54 billion Gorgon LNG project, which includes participation from oil majors like Chevron Corp. (ticker: CVX, Chevron.com), Royal Dutch Shell (ticker: RDSA, Shell.com) and ExxonMobil (ticker: XOM, ExxonMobil.com), is expected to begin shipments soon as well.
“The timing is incredible,” said Neil Beveridge, an analyst with Bernstein.
Earlier this month, Chevron began to lower prices from its Gorgon project in order to entice more buyers for its production, reports Reuters. The price of the new deals are estimated to at 12.2%-12.3% of crude oil, plus a small fixed fee and a floor price, according to industry sources, mainly targeted at buyers in China. The contracts held with Japanese clients are set at 14.85% of oil prices for 25 years of supply.
“New agreements with Chinese customers … are important steps in the commercialization of Chevron’s equity natural gas holdings in Australia, demonstrating the project’s competitiveness,” a Chevron spokesman said.
If Chevron is unable to find customers for the remaining liquefaction from its Gorgon project, the company will be left on the hook for a quarter of its share of Gorgon’s unsold volume this decade, leaving it few options but to dump supplies into the spot markets.
The ramp up of production from Sabine Pass and Gorgon will likely keep downward pressure on global LNG markets, which are already “the roughest LNG market conditions at least since the global financial crisis (maybe worse),” according to Raymond James.
