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Naturgy said to have canceled April LNG loading from Sabine Pass in US: source

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Naturgy said to have canceled April LNG loading from Sabine Pass in US: source

Highlights

Weak international prices being blamed

American liquefaction facilities keep utilization high

Houston — Spanish utility Naturgy was heard to have canceled an April-loading cargo from Cheniere Energy's Sabine Pass liquefaction facility in Louisiana due to low international LNG prices, an Atlantic-based trading source said Thursday.

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Cargo cancellations were not heard from other offtakers from the facility or other facilities located in the US, said the person, who spoke to S&P Global Platts on condition of anonymity to discuss sensitive commercial arrangements.

Record low prices and weaker than expected demand in Asia, oversupply concerns and the recent coronavirus outbreak have created a perfect storm of headwinds for LNG producers and developers looking to add terminals or trains.

A Cheniere spokeswoman, Jenna Palfrey, declined to confirm the cancellation, though she said Cheniere's contracts with its offtakers provide a measure of financial protection for the company. Naturgy holds a total of 5 million mt/year of offtake commitments across Sabine Pass and Cheniere's export terminal near Corpus Christi, Texas.

"The flexibility inherent in our SPAs is a feature LNG customers worldwide highly value, as evidenced by the significant contractual support of both our Sabine Pass and Corpus Christi projects with long-term take-or-pay-style contracts," Palfrey said in an email responding to questions. "The fixed-fee component of our SPAs ensures stable, reliable cash flow to Cheniere, even in a scenario where a customer elects to suspend delivery."

Cancellations involving US LNG export cargoes have been rare over the last several years because contracts generally provide for the producer to collect a fee from offtakers whether the offtaker lifts a cargo or not. In a potential worrisome sign for the market, one of Cameron LNG's offtakers, Singapore's Pavilion Energy, canceled its spot vessel requirement for a mid-November 2019 loading, with poor economics said to be at play. France's Total, one of the joint venture partners at the Louisiana facility, has described what happened as a one-off issue that doesn't reflect on the overall operations of the terminal.

Earlier this month, the CEO of Freeport LNG, Michael Smith, said in an interview with Platts that he did not expect the current weak market environment to lead to shut-ins of supply in the near term at the Texas facility. None of its offtakers is pressing to renegotiate existing contracts, he said.

At the time, Smith said his facility was running full out on its first two trains and that all of Freeport LNG's offtakers were exporting everything that they were contractually obligated to take. He said there were no cargoes in the forward queue that have been canceled by Freeport LNG's customers, and the terminal was scheduled for several months in the future.

The news about the Naturgy cancellation came even as feedgas deliveries to the six major US LNG export terminals rebounded to approximately 9.3 Bcf/d on Thursday, near a record level, according to Platts Analytics data.

Flows had fallen sharply over the last two weeks amid maintenance that Cheniere was conducting at Sabine Pass and Sempra Energy at Cameron LNG. While neither operator would confirm the work had concluded, gas deliveries to both facilities have returned to pre-maintenance levels.

A Cameron LNG spokeswoman said Train 2 commissioning is progressing well relative to the commissioning plan. Cameron LNG expects LNG production and gas flow to fluctuate during the final commissioning steps, she said.

Besides Cheniere's two facilities, Cameron LNG and Freeport LNG, Kinder Morgan operates Elba Liquefaction in Georgia and Dominion Energy operates Cove Point in Maryland.