Cheniere Energy Partners (NYSE:CQP) reported a deal with Chinese energy firm ENN Energy for 1.5 million tonnes per annum of bi-directional LNG from the Sabine Pass LNG terminal in Louisiana. The MOU covers a 20-year agreement for the supply of LNG to ENN, should regulatory approvals proceed as planned.
Cheniere is working to jump regulatory hurdles to transform its Sabine Pass LNG recieving terminal into a liquefaction export terminal. The Sabine Pass project will incorporate up to four LNG trains with a capacity of 0.7 Bcf/d of natural gas and an average liquefaction processing capacity of 3.5 mtpa.
The company foresees LNG export as early as 2015.
"We are excited to participate in supplying natural gas to China, and we believe that ENN is a successful model for developing diverse solutions to serve its fast growing energy markets," said Charif Souki, chairman and CEO of Cheniere Partners. "ENN Energy Trading is an ideal customer that is expanding its natural gas distribution network and seeking new sources of natural gas supply in order to increase its customer connections and increase its sales volumes."
I'm sure US natural gas producers are excited about the agreement, as well.
This means that the glut of natural gas in the North American market has someplace to go, and an increasing demand to meet -- China.
With the development of the vast shale plays across the US, the amount of natural gas in the market has skyrocketed, and the price of natural gas has dropped.
"We believe current market fundamentals have created an opportunity for the U.S. to offer natural gas to global markets at competitive prices. The U.S. is experiencing an increase in natural gas production, primarily driven by unconventional gas plays, while natural gas demand in the U.S. continues to lag behind market projections. Due to the depth of the markets in S outh Louisiana with an abundance of supply and existing pipeline infrastructure, we can provide an additional outlet for U.S. natural gas production while offering a low cost source of supply for global buyers seeking alternatives to oil-indexed contracts," said Souki.
What does this mean for the US? Should this deal (and others) go through, the US is poised to become a major exporter of LNG -- which should prove a strong catalyst for increasing prices.
Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.