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Way Down Yonder on the Sabine-ahoochee - A Lot About LNG Exports from Cheniere's Sabine Pass

Since the first LNG ship left its dock in February, Cheniere’s Sabine Pass LNG terminal has exported 17 cargoes containing the super-cooled, liquefied equivalent of over 50 Bcf of natural gas from the first of six planned liquefaction “trains.” And in a monthly progress report filed with the Federal Energy Regulatory Commission last month, Sabine Pass said it expected to begin loading a commissioning cargo from Train 2 in August, with commercial operation of that facility starting as early as September. In today’s blog we provide an update of Sabine Pass’s export activity, as well as the impact on the U.S. gas flows and demand.

When we last checked out Sabine Pass in February (2016) in Commencing Countdown, the terminal was in the late stages of commissioning activities for the first train planned for the export terminal. Cheniere’s Sabine Pass LNG (SPL) terminal in Cameron Parish, LA (along the Texas-Louisiana border) is the first of four brownfield projects targeting gas exports from the U.S. The terminal will ultimately include six liquefaction trains, each with the capacity to supercool up to 650 MMcf/d of natural gas into LNG (at -260o F) for a total capacity to liquefy 3.8 Bcf/d for loading and shipment overseas. The facility also has 17 Bcf of LNG storage capacity onsite. After four months of start-up activity beginning in October 2015, including taking delivery of piped natural gas to fuel compressors and to fill its five storage tanks, Train 1 began liquefaction and ultimately loaded and pushed off the terminal’s inaugural commissioning cargo on February 24 — the 3.39-Bcf Asia Vision bound for Brazil’s Petrobras — marking the first LNG export cargo from the Lower 48 since 1959, when the world’s first experimental LNG tanker The Methane Pioneer departed from Lake Charles, LA, with a tiny one-off cargo to the UK. Since February of this year, the terminal has completed its commissioning activities and on May 4 (2016) received approval from the Federal Energy Regulatory Commission (FERC) to begin commercial operations for Train 1. With its purchase of BG Group, Royal Dutch Shell acquired BG’s 20-year sales and purchase agreement (SPA) to off-take 3.5 million tons per annum (MTPA, the equivalent of about 460 MMcf/d), starting in November/December 2016, but in the meantime Shell has the option to take some of these early cargoes. That’s on a “free on board” (FOB) basis, meaning Shell will off-take the cargo at loading and is responsible for its delivery. Kansai Electric and Chubu Electric each have their own short-term (2-year) contracts of 0.8 MTPA (105 MMcf/d) and 0.7 MTPA (92 MMcf/d), respectively, on a “delivery ex ship” (DES) basis, which means Cheniere is responsible for the deliveries. Cheniere has chartered three ships for its DES deliveries — Clean Ocean, Creole Spirit and Oak Spirit.

Train 1

So what has been going on at Sabine Pass over the past six months?  We can keep up with the latest export cargos using North American LNG Supply & Demand, a report and service from our good friends at Genscape that meticulously tracks activity at the terminal and has observed that 16 more cargoes have loaded and pushed off from Sabine Pass since that first cargo, totaling another 54 Bcf in capacity. (Keep in mind that actual volumes loaded may be somewhat lower than ship capacity.) Table 1 summarizes Genscape’s tally of cargoes out of Sabine Pass in order of arrival, including the vessel name, loading start and end dates (down to the minute), number of hours to load, the destination port and travel time to get there, and the volume in billion cubic feet (Bcf). After that first export cargo, there was an initial lull in activity, but cargoes resumed in mid-March (2016) and have maintained a steady pace since then, generally averaging about three per month, and increasing to five in June as loading times have improved drastically from those initial commissioning cargoes. The first seven cargoes (#2 through #8 in the table) were part of commissioning activity. With the start of commercial operations for Train 1 in May, the second Creole Spirit cargo (#9) became the first commercial export cargo to leave the port. Word is that Shell opted to forego that cargo, leaving Cheniere to sell it in the spot market. That would make Gaslog Shangai the first cargo after Sabine Pass officially went commercial, and that shipment was taken by Shell. Of these first 17 export cargoes (including Asia Vision), 13 have arrived at their destinations, and of those, the bulk (9) have ended up in South America, the first two of those to Brazil, another four to Argentina and three to Chile. The first commercial spot cargo also became Sabine’s second export to the Middle East — arriving at Kuwait’s Mina Al Ahmadi port by the first week of June. Shell’s first off-take went to Chile’s Quintero port, arriving there mid-June. And the next four cargoes have ended up in either Chile or Argentina, while the last four remain en route.

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