The Tide is High - An Update of Sabine Pass LNG Exports

Natural gas deliveries for export via Cheniere Energy’s Sabine Pass LNG terminal in Louisiana reached a record in late July, topping 2.5 Bcf/d. In the first seven months of 2017, exports have added an average of 1.5 Bcf/d — or more than 300 Bcf total — of baseload gas demand year on year. Thus far, the terminal has been operating with three liquefaction trains. Now the fourth train, which would bring on another 650-MMcf/d of potential export demand, is nearing completion. The incremental gas deliveries are scheduled to come just as winter heating season is kicking off and likely will tighten the gas market. Today, we look at the latest developments at the terminal.

As Cheniere pointed out last week in its second-quarter earnings call, its Sabine Pass liquefaction terminal — the first U.S. Lower-48 LNG export facility — has quickly become the biggest single-use recipient of natural gas in the U.S. The rising tide of liquefied natural gas (LNG) exports from the U.S. began with a ripple in February 2016, when the first LNG cargo left Sabine's dock. Since then, the latest numbers from Genscape’s North American LNG Supply & Demand data show that Sabine Pass has exported 156 cargoes from the first three of its six planned liquefaction trains, the equivalent of about 520 Bcf of natural gas, assuming all cargoes were loaded to capacity. Nearly a fourth of the shipped cargoes (37) went to Mexico. Another 34 cargoes, or 22%, went to Asia, primarily to South Korea, Japan and China. The third-largest destination was South America, with 31 cargoes (20%) received to date, mostly by Chile. The Middle East and Europe have received about 20 cargoes (14%) each. Another nine (6%) went to India; and the remaining cargoes were one- and two-offs to Egypt and the Dominican Republic, respectively. Cheniere kicked off its 20-year sale and purchase agreement (SPA) with Korea Gas Corp. (KOGAS) for Train 3 production in June 2017, and as of this month, it had also delivered its first commercially contracted volumes from Train 2 to Gas Natural Fenosa and BG Gulf Coast LNG.

We can look to pipeline flow data to understand the effect of this export demand on the U.S. gas market. We’ve done this exercise several times before in the RBN blogosphere: In Commencing Countdown (February 2016), around the time of the first export cargo from the terminal; again in July 2016 in Way Down Yonder, followed by a two-parter titled Feels Like the First Time in August 2016; We provided another update in January of this year in Hear My Train a Comin’ and most recently this past April in Train Kept A-Rollin’.

To recap, pipeline deliveries of natural gas to the terminal — which also has a 17-Bcf storage facility onsite — averaged little more than 500 MMcf/d in the first five months of operation, from February to June 2016, according to gas flow data from our friends at Genscape (for more on flow data analysis, see Sooner or Later). In July 2016, as Train 2 was nearing completion, the volume jumped to more than 700 MMcf/d and then to more than 1.0 Bcf/d for some days starting in August and in the first half of September 2016. The uptrend was interrupted in the second half of September by a planned outage to allow for modifications and routine maintenance. When deliveries resumed in October, however, they shot up to more than pre-outage levels, with deliveries averaging 1.5 Bcf/d through November and December. 

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