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Cheniere to detail carbon footprint of cargoes for LNG buyers

Cheniere Energy Inc. plans to start providing customers with greenhouse gas emissions data for every LNG cargo it exports, in a move that the company's top executive called a "crucial step in understanding and managing emissions profiles" across the natural gas supply chain.

The company said it is the first time a major LNG producer has announced a greenhouse gas emissions-reporting plan for all of its cargoes, from wellhead to delivery point. The announcement from Cheniere came at a time when the natural gas industry faces growing scrutiny of methane emissions, a potent climate-warming gas.

In tagging each cargo with a carbon footprint, Cheniere will quantify for buyers in CO2-equivalent what offset would be needed to make that cargo carbon-neutral, Cheniere CEO and President Jack Fusco said Feb. 24 during a fourth-quarter 2020 earnings call. Cheniere expects to start providing the data in 2022.

"I do view this as a competitive advantage for us," Fusco said. "If we put everybody else on the same level playing field, I think we're going to find out that U.S. LNG can be very competitive, and Cheniere's LNG extremely competitive worldwide, in helping with some of these countries' environmental aspirations."

Cheniere is the United States' biggest individual physical consumer of natural gas and exporter of LNG. The company said the lifecycle analysis it built incorporates analysis frameworks developed by the U.S. Department of Energy, publicly available data from value chain participants, and operational data from its Sabine Pass LNG plant in Louisiana and its Corpus Christi LNG plant in Texas.

Cheniere expects its emissions reporting to provide a more accurate picture about the company's greenhouse gas emissions and that some previous emissions estimates by other parties, including a 2014 lifecycle analysis by the DOE's National Energy Technology Laboratory, have been higher than what Cheniere believes its carbon footprint really is, Fusco said. The reporting should also support better management of supply chain emissions, Fusco said.

"We have got to walk before we can run," Fusco said. "There is a lot of misinformation out there."

Cheniere, like other proponents of the LNG industry, sees LNG exports as a means of driving down global carbon emissions as a cleaner-burning alternative to coal and a reliable energy source for supporting energy demand growth.

Executives were bullish about an increased LNG buyer appetite for signing new supply deals. Cheniere reported reaching medium-term LNG sales agreements with multiple buyers during the fourth quarter of 2020, which totaled about 4 million tonnes worth of LNG from Cheniere's portfolio. But the company is still working to secure sufficient supply deals to commercially sanction a midscale expansion of its newer terminal in Corpus Christi.

"There's an opportunity for us to really move the commercialization forward this year," Fusco said. "The volatility in the LNG markets has created a sense of urgency with the customers. And I think we'll be in good shape on that project."

LNG prices in North Asia soared this winter as the combined result of supply outages, shipping constraints and extremely cold weather.

"This event over the winter was quite a shot across the bow, where our customers continued to enjoy reliable, stably-priced product, and those that thought that relying on the spot market equals low prices, obviously, did not experience that," Cheniere's Executive Vice President and Chief Commercial Officer Anatol Feygin said.

The company said the deals it struck in the fourth quarter were with end-users in the Western Hemisphere, and executives did not attribute those deals to the winter extremes. Terms ranged from about five to 11 years.

Cheniere was also hopeful of improved relations between the U.S. and China supporting commercial negotiations for long-term supply contracts. The company reported selling several recent spot cargoes to buyers in China, a country that Feygin called the "primary engine of LNG market growth."

In the meantime, Cheniere expects to reach substantial completion in the coming weeks on a third liquefaction train at its Corpus Christi terminal, Fusco said. The developer asked the Federal Energy Regulatory Commission on Feb. 10 for authorization to place the unit into commercial service.

Cheniere on Feb. 24 posted fourth-quarter 2020 adjusted EBITDA of $1.05 billion, up from $987 million a year prior. The S&P Capital IQ consensus adjusted EBITDA estimate for the quarter was $992.1 million.

For the full year of 2020, the company posted adjusted EBITDA of $3.96 billion, an increase from $2.95 billion a year prior. The S&P Capital IQ consensus estimate for full-year 2020 adjusted EBITDA was $3.92 billion.

Cheniere also increased its 2021 adjusted EBITDA guidance to be in the range of $4.1 billion to $4.4 billion and its distributable cash flow guidance to be in the range of $1.4 billion to $1.7 billion.

Cheniere Energy Partners LP in a same-day news release reported fourth-quarter 2020 adjusted EBITDA of $772 million, an increase from $766 million in the same period a year ago. The S&P Capital IQ consensus EBITDA estimate for the fourth quarter of 2020 was $699.5 million. Cheniere Energy Partners' fourth-quarter 2020 net income came in at $409 million, down from $448 million in the previous year.

For the full year of 2020, the partnership posted adjusted EBITDA of $2.76 billion, up from $2.51 billion in 2019. The S&P Capital IQ consensus EBITDA estimate for the full year of 2020 was $2.68 billion. Cheniere Energy Partners recorded a full-year 2020 net income of $1.18 billion, compared with $1.18 billion a year ago.

The partnership expects its 2021 distribution guidance to be between $2.60 per unit and $2.70 per unit.