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South Korea's KoGas in talks with Cheniere for more LNG supply, says CEO

Houston — Korea Gas, the largest natural gas buyer in South Korea, is talking to Cheniere Energy about the possibility of acquiring additional capacity from the LNG exporter that would help it commercialize two liquefaction trains for which it has permits but has not yet made a final decision to build, CEO Seung-Hun Lee said Sunday.

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The comments during a small gathering at Cheniere's Sabine Pass terminal in Louisiana to mark the commencement of a 20-year sales and purchase agreement for KoGas to take LNG from the facility highlight the aggressive marketing the company is doing to reach new deals, just as it faces growing competition from other US developers along the Gulf, Atlantic and Pacific coasts.

With the SM Eagle tanker expected to arrive in South Korea on July 1 with the first shipment of LNG from Sabine Pass' train 3 under the SPA signed in 2012, executives from Cheniere and KoGas said they want to build on their commercial relationship.

Cheniere is seeking offtakers for train 6 at Sabine Pass and train 3 at its Corpus Christi, Texas, export terminal before deciding whether to move forward with those units.



KoGas' current agreement with Cheniere calls for the exporter to deliver about 450 MMcf/d of LNG, representing more than 10% of South Korea's total annual demand.

"There is a strong possibility," Lee said of KoGas securing capacity from the two Cheniere trains that have yet to be commercialized. "But at this moment we are just talking about the possibility. What is sure is we are taking gas now from train 3 at Sabine Pass."

Platts Analytics data shows that South Korean LNG demand was 7.18 Bcf/d in January, but dropped as low as 3.78 Bcf/d in May.

Cheniere has three trains operating at Sabine Pass, a fourth being commissioned and a fifth train that it is building at the facility in Cameron Parish, Louisiana. It also is currently building two trains at Corpus Christi.

"The team's been very busy" trying to secure new deals, Cheniere CEO Jack Fusco said. "It's a main focus of mine and ours and our executive team here at Cheniere to grow the business. We think we have a very competitive product and we're working hard to get everything commercialized."

KoGas currently has offtake contracts with a number of LNG producers that are mostly located in the Asia Pacific and the Middle East.

Fusco declined to say how many potential offtakers Cheniere was talking to in addition to KoGas to commercialize the two remaining trains.


EXPORTS TO 23 COUNTRIES


Since becoming the first US exporter of LNG produced from shale gas in February 2016, Cheniere has shipped more than 140 cargoes to 23 countries.

A tanker operated by Norway's Knutsen OAS was being loaded Sunday at Sabine Pass. Fusco said Spain's Gas Natural Fenosa was the offtaker.

It was not clear where the cargo would land. Market sources recently reported that Gas Natural was awarded one cargo as part of Mexico's Altamira receiving terminal's nine-cargo tender.

KoGas, under its SPA with Cheniere, has a fixed liquefaction fee of $3/MMBtu for train 3, the same fee India's Gail Limited, Britain's Centrica and France's Total will pay for liquefaction at trains four and five.

Royal Dutch Shell's BG has a liquefaction fee of $2.25/MMBtu for train 1, while Gas Natural Fenosa has a $2.49/MMBtu liquefaction fee for train 2.

On Sunday, South Korea received four LNG vessels; two from Indonesia and one each from Oman and Australia.

South Korea last received a vessel from Sabine Pass on June 14 aboard the Methane Spirit. A day earlier, on June 13, the Cheniere-chartered GasLog Chelsea delivered a Sabine Pass-laden volume into South Korea's Pyeontaek terminal. Neither cargo was part of the two companies' SPA.

Steve Pattrick, manager of production at Sabine Pass, said during a tour of the facility Sunday that Cheniere's Sabine Pass typically has an LNG vessel service, load and exit in about 24 hours.

The actual loading of a standard 3.4 Bcf vessel usually takes about 12 hours.

Pattrick also said that since the first two vessel loadings of train 1, all vessels have loaded the same quality of LNG.

Between Sabine Pass and Corpus Christi, Cheniere expects to invest approximately $30 billion in US infrastructure. Total expenditure as of May stood at approximately $19 billion.

--Harry Weber, harry.weber@spglobal.com
--Chris Pedersen, chris.pedersen@spglobal.com
--Edited by Wendy Wells, wendy.wells@spglobal.com