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Cheniere closer to expanding Texas LNG site

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Reuters are reporting that Cheniere Energy Inc has signed a deal to sell LNG to China National Petroleum Corp (CNPC) from its Corpus Christi export terminal under construction in Texas, moving the top US LNG company closer to expanding the site.

CNPC’s PetroChina International Co Ltd subsidiary will buy about 1.2 million tpy of LNG under two agreements with a portion of the supply beginning in 2018 and the balance in 2023.

The deal should move Cheniere to the top of the pack of companies competing to build the next generation of US LNG terminals to meet potential supply shortfalls in the early 2020s. The company is currently the only major exporter of LNG in the lower 48 US states.

The agreements continue through 2043 for the purchase of LNG indexed to the US natural gas Henry Hub benchmark price.

Cheniere has two 0.7 billion ft3 per day units under construction at Corpus Christi and one at Sabine Pass, in addition to the four 0.7 billion ft3 per day liquefaction trains in operation at Sabine Pass.

Cheniere also has other units that are fully permitted at both Sabine Pass and Corpus Christi, including train 3, that it plans to build once it obtains enough financial commitments.

Cheniere’s Sabine Pass terminal in Louisiana is currently the only big LNG export facility operating in the country. Several other companies are building other trains at six sites which is expected to make the United States into the third biggest LNG exporter by capacity in 2018.

Total US export capacity is expected to rise to 4.6 billion ft3 per day by the end of 2018 and 9.4 billion ft3 per day by the end of 2019 from 3.0 billion ft3 per day now.

While many companies are competing to build the next generation of US LNG export terminals, the combination of the CNPC deal and a deal announced in January to sell LNG to Swiss commodity trader Trafigura puts Cheniere in the lead.

Analysts at Cowen & Co said in a note that Cheniere should generate about US$4 billion in discretionary cash flow through 2021, enough to finance the roughly US$2.5 billion cost to build train 3 at Corpus without project financing.

Cheniere shares were up 4.6% at US$55.57 on 9 February.

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