LNG Treads Market Lightly
by Colin Guy The Beaumont Enterprise, Texas
April 23, 2008
Cheniere Energy's Sabine Pass Liquefied Natural Gas terminal welcomed its first delivery this month.
But it will have to wait for the right market conditions before greeting another.
Cheniere Chief Executive Officer Charif Souki, who celebrated the opening of the LNG terminal Monday, said his company will wait until prices are reasonable before making additional cargo purchases.
"When we get commercial terms we can live with, we'll bring them," Souki said, adding later that he believes there will be more natural gas delivered this summer, but he does not know when.
Souki dismissed the notion that a drop in the expected number of shipments this summer, a result of markets in Europe and Asia outbidding the U.S. for supplies, will affect his company's long-term viability.
In the United States, LNG recently fetched prices of around $10 per million British thermal units (Btus), while some Asian buyers are offering suppliers more than $15 per million Btus.
A Btu is the amount of heat needed to raise the temperature of a pound of water by 1 degree Fahrenheit.
It also is a measurement of how natural gas is sold by volume.
If U.S. consumers had to pay $15 per million Btu for natural gas, it could lead to an increase in the price of many consumer plastics, much of which is made from natural gas' chemical building blocks.
Texas and Louisiana chemical plants are major consumers of natural gas, which also goes by way of pipeline to markets in about three-fourths of the United States.
Natural gas prices also affect how much some homeowners pay to heat their homes in the winter.
"We're not making a bet on what's going to happen in one season. We're making a bet on what's going to happen over the next 20 years," he said.
The United States will have to begin paying "world prices" for LNG at some point, he said, noting that because of resistance to the development of new coal and nuclear plants, LNG is the only option available to meet growing energy demands.
"Nobody should doubt the resolve of this country when we need something," he said.
U.S. Energy Secretary Samuel Bodman expressed confidence in the project.
"I have every reason to believe they'll be successful," he said.
Souki said activity at the LNG terminal, which will have a 4 billion cubic foot per day send-out capacity after the second phase is complete next year, will begin ratcheting up gradually.
He said the terminal eventually would receive more than 240 deliveries of LNG each year, but that it will take a while before it reaches that point.
LNG delivered to the terminal will be shipped to markets throughout the region and nation.
Cheniere's 94-mile Creole Trail Pipeline, which cost more than $500 million, is expected to be complete within two weeks, Souki said.
Altogether the terminal and pipeline cost more than $2 billion to build.
Cheniere's ability to raise this capital and see the project through to the finish despite setbacks such as Hurricane Rita earned the company praise from several dignitaries present for the commissioning ceremony.
"This is an outstanding facility, impressive in every way, and bringing it online within five years is even more impressive," Louisiana Sen. David Vitter said. "It shows what we can do in our own country to meet our energy needs when we have the will and vision and the government gets out of the way."
Copyright (c) 2008, The Beaumont Enterprise, Texas. Distributed by McClatchy-Tribune Information Services.
Sabine Pass LNG
Cheniere Energy, Inc
Cameron Parish, LA United States