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Highlights

Long-term contracts key to equation for Cheniere expansion

'Good chance' Sabine Pass Train 6 producing this year: Feygin

Soaring Asian spot LNG prices should push buyers that rely heavily on the prompt market to consider long-term contracts that can lock in more favorable terms, Cheniere Energy's chief commercial officer, Anatol Feygin, said Sept. 22 in an interview with S&P Global Platts.

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Those spot-dependent customers have "soured on that as a strategy" and appear to have an increasing sense of urgency heading into a winter in which the market could see tight supplies and even higher prices, Feygin said via a web call from Dubai, where he was attending the annual Gastech conference.

New commercial activity would help support adding more US liquefaction capacity. Cheniere's outlook is one reason the country's biggest LNG exporter believes it will be able to secure offtake agreements totaling another approximately 4 million mt/year to reach a threshold at which it is comfortable advancing its 10 million mt/year Corpus Christi Stage 3 project at its Texas export terminal. A final investment decision is expected in 2022.

"Do we want to be in a world with such elevated prices? No," Feygin said. "We think the hallmark of Cheniere's US LNG is relative price stability and relative affordability."

The Platts JKM, the benchmark for spot-traded LNG delivered to Northeast Asia, has seen a six-fold jump in just a year, recently being assessed above $28/MMBtu.

Most of Cheniere's customers are "not paying anywhere near these levels," Feygin said.

While Cheniere has a substantial marketing function that sells spot cargoes, its primary operations depend on long-term contracts. More recently, it has signed several medium-term term deals. Cheniere has been pitching the buffet of solutions to counterparties with whom it is in active discussions.

Cheniere currently operates five trains at its Sabine Pass export facility in Louisiana and three trains at its Corpus Christi export facility. A sixth train at Sabine Pass is nearing completion. During the Platts interview, Feygin said that depending on certain variables "there's a good chance" Train 6 will begin production before the end of 2021. Cheniere was awaiting approval from US regulators to flow feedgas to Train 6 as part of the commissioning process.

Demand from Asia, and China in particular, underpins the enthusiasm from some US LNG exporters and developers, including Cheniere.

The potential for economic headwinds in China that has recently surfaced has raised concerns from some market participants that growth there could slow. That doesn't worry Cheniere, however, in terms of its own outlook, Feygin said.

"China continues to be a big reason for the confidence," Feygin said.

He added: "We don't see any wavering. We see continued economic strength and gas demand strength. The only thing I'd say about China's economy is it's off the breakneck growth rate. Still in a V-shaped recovery, but you can't sustain growth rates we had seen earlier in the year."