Denver — After reaching a final investment decision on Sabine Pass Train 6 in June, Cheniere Energy now expects the facility's additional capacity to enter service in 2023, when global markets anticipate greater spot market liquidity and possibly a slowdown in new LNG supply.
In a filing to the Federal Energy Regulatory Commission Friday, Cheniere requested an extension to an April 2015 authorization from the agency to construct and operate Sabine Pass Trains 5 and 6.
That authorization required both trains be made available for service by April 2020. An extension from the agency, though, would give Cheniere until end-December 2023 to place Train 6 facilities into service.
Cheniere's FID on Train 6 in June was largely expected by the market after the company announced separate offtake agreements with Malaysia's Petronas last December and with commodity trader Vitol in September 2018. According to Cheniere, both agreements will support production from the unit.
In a June investor presentation, Cheniere said it would continue to seek firm offtake contracts in support of the unit and could potentially assign offtake to the train from a previous deal with Polish oil and gas company PGNiG.
Still, when combined, the Petronas and Vitol long-term offtake volumes currently assigned to Sabine Pass Train 6 are equal to only about 40% of the unit's production capacity.
When Cheniere reached FID on the third train at its facility in Texas, it did so with 66% of the capacity covered by long-term contracts tied specifically to the unit, compared with the roughly 87% of capacity that Cheniere contracted for earlier trains at both of its terminals.
GLOBAL LIQUIDITY, SUPPLY
The recent and anticipated growth in LNG spot markets seemed to offer Cheniere great certainty about the fate of new supply potentially marketed on a spot basis.
Some of the largest positive final investment decisions announced in the global market recently have been made without the support of previously announced firm-offtake agreements.
That was the case for Shell's FID on the 14 million mt/y LNG Canada project as well as the ExxonMobil, Qatar Petroleum FID on the 16 million mt/y Golden Pass LNG project.
According to global LNG industry group GIIGNL, over 99 million mt or about 32% of volumes delivered in 2018 were done so on a spot or short-term basis. Five years prior, total spot and short-term volumes amounted to just 65 million mt or about 27% of the global trade.
With construction and commissioning of Train 6 extending into early 2023, the timing of the facility's startup could also work in Cheniere's favor, given the recent growth in spot market supply.
Earlier this year, the precipitous growth in new, flexible LNG supply was at least partially to blame for the decline in global prices, which dipped into the low $4s/MMBtu for cargoes delivered to Northeast Asia's premium Japan, South Korea, China and Taiwan import markets.
According to market experts, lower prices could linger over the near term before an anticipated tightening comes in the early to mid-2020s.
-- J. Robinson, Harry Weber, Emmanuel Corral, firstname.lastname@example.org
-- Edited by Pankti Mehta, email@example.com