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Cheniere expects reduced maintenance outages at Sabine Pass, Corpus Christi LNG terminals

Highlights

Corpus Christi Stage 3 to produce first LNG in 2024

Maintains FID targets in 2025, 2026

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  • Corey Paul
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  • Richard Rubin
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  • LNG Natural Gas Upstream

Top US LNG exporter Cheniere does not expect extended summer outages at its facilities in Texas and Louisiana this year as it pursues a less extensive maintenance program than in 2023, executives said May 3.

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"We do not anticipate a long outage like we executed in June last year," CEO Jack Fusco said during a first-quarter earnings call.

Fusco said Cheniere had spread out its maintenance work across the year and has already completed several smaller-scale turnarounds.

Cheniere, which expects to produce about 45 million mt/y in 2024, stopped short of providing specific guidance on how much maintenance it has planned for the remainder of the year but that it would occur mostly in the second and third quarters.

Cheniere provided that outlook at a time when heavier-than-usual maintenance on US LNG facilities along the US Gulf Coast is helping tighten global LNG supplies, creating bullish conditions in the LNG market this spring, along with constrained production in places including North Africa and Australia.

Maintenance

Spring maintenance at US LNG facilities is typically clustered around May and June.

Most historical maintenance events at Sabine Pass have lasted between 20-30 days. But Cheniere in 2023 executed a major maintenance turnaround at its flagship Sabine Pass LNG terminal in Louisiana planned as part of a six-year maintenance cycle, which focused on two of the six liquefaction trains of the facility.

So far in 2024, the most significant outage has been at the Freeport LNG facility in Texas, where the operator has been working on repairs and upgrades at the facility following a major outage starting in January, with plans to return to full three-train capacity in early May.

The operator of the Cameron LNG facility in Louisiana on May 2 also confirmed the start of scheduled maintenance at that plant.

Total US LNG feedgas demand was about 12 Bcf/d on May 3, S&P Global Commodity Insights data showed, based on nominations for the morning cycle that could later be revised. Overall US LNG feedgas demand in April averaged about 11.9 Bcf/d, down from about 14 Bcf/d in the same month of 2023.

Lower US LNG production has also been weighing on domestic gas prices, with the NYMEX Henry Hub prompt contract hovering around $2/MMBtu May 3. Market participants are waiting for new US LNG to come online as a key source of demand growth.

Cheniere executives May 3 said the company continues to expect the first LNG from a 10 million mt/year midscale expansion at its Corpus Christi LNG terminal by the end of 2024 before bringing the entire project online by the end of 2026. The facility is more than 55% complete, according to the company.

"We're not popping champagne yet, but we've very optimistic of our ability to start producing LNG this year on Train 1," Fusco said.

Any delays in new supply expected to come onstream in the US and globally in 2024 could exacerbate supply tightness in the LNG market, Chief Commercial Officer Anatol Feygin said during the earnings call. So could other factors, including summer heat waves in India and China expected to result in elevated seasonal demand.

Feygin described demand growth in Asia, particularly in China, India and Thailand, in response to international LNG prices that have fallen significantly from 2023 and especially from 2022.

The Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward was assessed May 3 at $8.65/MMBtu, down 12 cents on the day.

Growth projects

Cheniere is continuing to pursue growth projects at both of its facilities, despite the White House suspension on issuing key LNG export projects announced in January.

Cheniere is targeting a final investment decision in 2025 on an expansion of its Corpus Christi facility that would add some 3 million mt/year and an FID in 2026 on a larger expansion of Sabine Pass that would add some 15 million mt/year, with the opportunity for further debottlenecking expansions at both plants.

Contracting tied to US LNG has slowed since the permitting freeze.

Feygin described 2024 as "a more normal year" for contracting but said the company was advancing talks and expected it would strike deals through 2025 that "very much rhyme with prior years in terms of the types of counterparties and the types of engagements."

"Clearly, there have been a number of developments that are causing the buyers to reassess and take their time," Feygin said. "No one has the fog of war and the proverbial gun to their head, like they did in 2022."

Cheniere on May 3 reported net income of about $500 million for the first quarter of 2024, compared with about $5.4 billion reported for the same period of 2023.

Cheniere attributed the unfavorable change primarily to about a $5 billion change in the fair value of its derivative portfolio. Cheniere uses derivatives to hedge its exposure to commodity markets in which it has contracts to purchase or sell physical LNG. If prices rise or fall, Cheniere must account for the mark-to-market gain or loss between the derivative and physical positions.