INTERVIEW: Cheniere looks to sell more LNG into Japan after maiden long-term supply deal

Cheniere Energy, the biggest US LNG exporter, is looking to sell more LNG to Japan after its recent maiden long-term supply deal with the country, Anatol Feygin, executive vice president and chief commercial officer, told Platts, part of S&P Global Energy, on June 18.

The comments come a week after JERA, the largest Japanese LNG importer, announced the signing of a non-binding heads of agreement to buy up to 1 million mt/year of LNG on an FOB basis for more than 20 years from Cheniere's Corpus Christi LNG terminal in Texas or its flagship Sabine Pass LNG export terminal in Louisiana.

"It is very important for us to ultimately conclude the transaction with JERA. As you know, it is an HOA, and we will work very hard to convert that into a binding agreement in the coming months," Feygin said in an interview on the sidelines of the Japan Energy Summit & Exhibition in Tokyo.

"We have had a wonderful working relationship with JERAGM (JERA Global Markets) since our very early days ... but to have this opportunity finally to consummate the transaction," he said, adding that Cheniere had previously not been in a position to transact with Japanese companies for a number of reasons.

"Usually, it has been because the buying pattern of companies here has not coincided with our timing on projects and volume availability," Feygin said.

"We have very healthy discussions with other Japanese companies, and we hope that our portfolio of Japanese offtakers does not begin and end with JERA."

'Nice tailwind'

Following Japan's 7th Strategic Energy Plan approved in February, Cheniere now sees support for LNG based on incremental power requirements for artificial intelligence and electrification, after the previous plan's "too pessimistic" power demand outlook, Feygin said.

"The 7th Strategic Energy Plan now has a double-digit increase in power demand coming, which, of course, is a nice tailwind for LNG," he said.

With Japan expected to continue investing in renewables and decarbonization, Feygin said: "We think that the LNG demand profile here will be flat to perhaps at times slightly higher than what we have seen over the last few years."

"I would not categorize it as a big growth market, but a much more stable, obviously, a market that can consume meaningfully more LNG than it has over the last couple of years," he said.

"Over the balance of this decade, as the growth wave of US and Qatari expansions, projects and expansions come into the market, I would expect Japan to be a big beneficiary of that as the affordability improves."

With JERA, Tokyo Gas and major Japanese trading houses being global players, Feygin said: "So we could also continue to see a scenario where more Japanese counterparties contract for Cheniere's product with the intention of having flexibility and portfolio, whether it is to serve the Japanese market or other global markets, not just Asia."

Expansion plans

Cheniere is pursuing expansions of both its flagship Sabine Pass LNG terminal in Louisiana and its Corpus Christi LNG export plant in Texas.

Cheniere's growth projects include a roughly 3 million mt/year expansion of Corpus Christi. The company expects to advance the two-midscale-train expansion to a final investment decision in 2025, having already commercialized the project through long-term deals with Equinor, Chevron and PetroChina.

When asked to comment on the status of the two-midscale-train expansion, Feygin said: "We have today all of our regulatory permits," following the completion of the Texas air permit "late last month."

With a commitment from Bechtel, Feygin said: "We are comfortable moving forward," adding that Cheniere expects to take a final investment decision on that expansion "in the coming months."

Cheniere recently tweaked its plans for a much larger Sabine Pass expansion, outlining them in an amended application June 6 at the US Federal Energy Regulatory Commission.

The expansion would add roughly 20 million mt/year of capacity on top of the 30 million mt/year currently in operation at Sabine Pass, which is the same as in the original proposal.

But the revised project now calls for building three new liquefaction trains, similar to the existing trains at the facility, instead of constructing two larger liquefaction units.

Each of the three trains would have a peak liquefaction capacity of about 6 million mt/year. Additional production capacity would come from a boil-off gas reliquefaction unit that would add about 1 million mt/year, along with debottlenecking work on the existing trains.

Fairly quickly

"What you saw with the refiling of the Sabine Pass project is a way for us to make the project itself more economic by leveraging as much of the brownfield advantage as possible," Feygin said.

"We have just refiled with the FERC; we think it will take about 1.5 years to go through the regulatory process. We are optimistic that it could be faster because the other part of the refiling is that we have pivoted back to the same train design that we used," he said.

The project would be broken up into two phases. The first phase includes one train, the boil-off unit, a compressor-based expansion of the Creole Trail pipeline system that feeds Sabine Pass, and associated facilities.

"We are optimistic that the first phase of that expansion, which will likely be one train and oil off gas liquefaction, is something that we could do shortly after we get the regulatory process behind us."

Cheniere already has significant commercial support to underpin the Sabine Pass expansion, having signed long-term contracts tied to the project that cover about 7.85 million mt/year.

"It still depends, of course, on the economics of the EPC (engineering, procurement and construction) and where we are with the commercial support," he added. "But as we look at our crystal ball today, we think that that project is in a position to move forward fairly quickly."