-Total to take 2 million tons of LNG a year
-Contract could ease financing for Sabine Pass expansion
-Less than half of Sabine Pass' proposed fifth train
contracted
(Updates with contract terms, other details)
By Ben Lefebvre and Tess Stynes
Cheniere Energy Partners LP (CQP) signed a 20-year contract
Monday under which it will supply French energy company Total SA
(TOT, FP.FR) with 2 million tons a year of liquefied natural gas
from Cheniere's export facility being developed in Louisiana.
The deal means that nearly all of the LNG export capacity
currently permitted in the U.S. has been spoken for. Total would
take its LNG from Cheniere's proposed fifth LNG train, or
processing facility, which would have a total capacity of 4.5
million tons a year. Cheniere, the only business holding U.S. LNG
export licenses in the lower 48 states, has already sold out its
four planned LNG trains and is contemplating building two more for
a total of six.
A technology driven boom in U.S. natural gas production and
slack demand amid recent mild winters has caused a glut of supply,
which has driven U.S. natural gas prices below $4 a million British
thermal unit. That compares with prices as much as five times
higher in other parts of the world, setting off a flurry of
applications from companies seeking to export natural gas
abroad.
Cheniere's contract with Total calls for the LNG price to be set
at 115% of U.S. natural gas benchmark Henry Hub plus $3 per million
British thermal unit.
Cheniere Energy Partners shares were up 5.8% at $21.39 in recent
trading.
Cheniere's pact with Total--along with additional indications of
interest--could help Cheniere to move ahead with the development of
a fifth train, each train being a LNG processing unit with capacity
of about 4.5 million tons a year. The company's LNG-export project
at its Sabine Pass operation initially was designed and permitted
for as many as four modular LNG trains.
Total's U.S. unit is planning to purchase about two million tons
a year of the train's annual capacity of about 4.5 million tons.
The first two trains are under construction and work on the second
two trains is expected to start next year.
Total and Cheniere previously has reached a partial accord
allowing the Cheniere facility access to services under Total's
terminal use agreement with the Sabine Pass operation, making
further expansion of LNG export capabilities possible.
The accord begins with the date of train five's first commercial
delivery--expected as early as 2018-- and has an extension option
of as much as 10 years.
Total's American depositary shares rose 32 cents to $51.18.
Write to Tess Stynes at Tess.Stynes@dowjones.com
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