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Cheniere’s LNG Is on the Next Level Due to Corpus Christi Expansion FID07/13/2022
Christi Expansion FID
According to Cheniere Energy’s board of directors announcement on June 22, the company declared the further expansion of its Corpus Christi, Texas. Moreover, the LNG plant could come sooner than expected due to the announcement of a final investments decision (FID) related to Stage 3 Liquefaction Project work at the export facility.
It will ensure the capacity to ship 10-plus million tonnes per annum (mtpa) from 7 midscale trains. Furthermore, Tudor Pickering, Holt & Co. (TPH) declared on June 23, that the possible ultimate capacity of the facility could be in the 11-12 mtpa range given 10.7 mtpa of long-term contracts have been signed with companies such as CPC, PGNiG, Sinochem, Foran, ENGIE, Apache, EOG and ARX CN.
Additionally, Cheniere announced two sale and purchase agreements (SPAs) with Chevron Corp.: Firstly, Chevron will obtain 1 mtpa of LNG from Sabine Pass Liquefaction LLC with deliveries considered to start in 2026. Deliveries will reach full capacity in 2027 and expire in mid-2042.
Secondly, Chevron will obtain 1 mtpa of LNG from Cheniere Marketing LLC with deliveries considered to start in 2027 and continue for about 15 years. The purchase price for the LNG under both SPAs will be indexed to the Henry Hub price, plus a fixed liquefaction fee as Cheniere claimed.
In total, TPH analysts expect that 3.2 mtpa is available for a new project, roughly 60% conditional on a positive FID.
Thanks to these agreements with Cheniere, Chevron will be able to harness increasing U.S. natural gas production and Gulf Coast LNG export capacity to meet long-term demand for affordable, reliable, and ever cleaner energy. Cheniere’s contract with Chevron takes place just weeks after the company’s subsidiary Cheniere Marketing LLC signed a 15-year SPA with Norway’s Equinor ASA in a deal that would see the European company acquire 1.75 mtpa of LNG commencing in the second half of 2026.
It is important to note, that Sabine Pass LNG LP and Chevron agreed to terms for the early termination of their LNG terminal use contract in return for a lump-sum payment to be made by Chevron to Sabine Pass LNG during 2022. The end of the agreement depends on the consent of certain lenders to Cheniere Energy Partners, which is expected third-quarter 2022.
Cheniere looks forward to leveraging its market-leading LNG platform to explore opportunities to collaborate with Chevron on lower-carbon initiatives in the future. The Corpus Christi Stage 3 project is the second U.S. LNG export plant after the Venture Global LNG Plaquemines facility to get an FID this year.
Since the expansion will have been completed, Cheniere’s aggregate nominal production capacity will be increased to more than 55 mtpa by the end of 2025 compared to 45 mtpa now. It will become a part of the industry-wide decarbonization movement away from coal and oil as this allows Cheniere to provide the global market with additional low-carbon fuels. First exports from the facility are anticipated in 2025.
Moreover, Cheniere announced that Bechtel Energy Inc. has received full notice to continue construction related to the project. Bechtel has already started early engineering, procurement, and other site work earlier this year under a limited notice to proceed.
Meanwhile, Cheniere Corpus Christi Holdings LLC (CCH), a wholly-owned subsidiary of Cheniere, closed an amended and restated $4 billion senior secured term loan due 2029 and an amended, extended, and upsized $1.5 billion working capital facility due 2027 a month ago.
The company states that the expected cost to develop, construct, and place into service the Stage 3 LNG project, the associated pipeline extension, and other infrastructure at or near the project, and for related business purposes will be funded by about 50% of the borrowings under the loan, while Cheniere will fund the remaining costs on its own.
Additionally, Cheniere announced that it contributed its wholly-owned equity interests in Corpus Christi Liquefaction Stage 3 to Cheniere Corpus Christi Holdings, and merged the former into Corpus Christi Liquefaction, a subsidiary of Cheniere Corpus Christi Holdings, with Corpus Christi Liquefaction continuing as the surviving company.
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13 years is not long enough: Glencore and Cheniere Sign Long-Term LNG Deal
Texas Cheniere and Swiss Glencore had entered into a free-on-board agreement for approximately 0.8 million tonnes of LNG per annum, starting in April 2023 for 13 consecutive years. This SPA demonstrates the commercial momentum Cheniere has been enjoying and marks an important milestone, as the company lays the groundwork for a final investment decision on Corpus Christi Stage 3, which is expected to occur next year.
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Enbridge acquired Tres Palacios natural gas storage facility in Texas for $335 million, adding approximately 35 Bcf of natural gas storage to their portfolio. The facility uses salt caverns for storage and has a gas header pipeline system that spans 62 miles and links to 11 major gas pipelines. Crestwood Equity Partners LP intends to divest its interests in Tres Palacios by the second quarter.
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Diamondback Energy, an independent oil and gas company, has successfully completed the acquisition of Lario Permian, marking the closure of two major deals in the fourth quarter of 2022. The company purchased two private operators in the Midland Basin for approximately $3.3 billion.