CHENIERE SEES HALF OF ITS US LNG EXPORTS HEADED FOR EUROPE: OFFICIAL
Some 50% of Cheniere’s future LNG supply from the US is likely to go to Europe, but the low cost of the gas would also give European buyers the option to send cargoes onward to other markets, a senior company official said Wednesday.
Cheniere Marketing President Jean Abiteboul said at a conference in Geneva that there were uncertainties over the demand picture for LNG in places like China and India, and that price would be the determining factor in where cargoes ultimately end up.
Asked whether Europe would be the dumping ground for US LNG given its spare regasification capacity, Abiteboul said: “I’m not sure it will happen that way.
“Even long-term customers [in Europe] will have the opportunity for arbitrage between markets,” he said, pointing to the possibility of reloading cargoes for shipping to Asia or South America.
He added that this was possible as there were no destination clauses in Cheniere’s term contracts with buyers and no take-or-pay obligations, just an obligation to pay the liquefaction fee.
Cheniere currently has 31.5 million mt/year of liquefaction capacity under construction at Sabine Pass and Corpus Christi, but plans to expand it out to 60 million mt/year.
US LNG COMPETITIVE IN EUROPE
Cheniere — the pioneer of US LNG — will ship the first cargo in January next year, and Abiteboul said that US LNG would be competitive in Europe, even in a low price environment.
Taking a TTF price of around $6.40/MMBtu, Abiteboul said an exporter of US LNG could still expect a margin of $2/MMBtu once all costs — including the cost of the gas, liquefaction and transportation — were factored in.
“So it’s still very much acceptable,” he said.
He also pointed to the fact that in the US, liquefaction costs are around $600-$800/mt, compared with costs of as much as $3,000/mt in some cases in Australia.
“So the US should be well-placed to supply any new demand growth in both Europe and Asia, as well as new markets like South America,” he said.
He added: “We don’t have long to wait to see the impact of US LNG on the market in general and in Europe in particular.”
Abiteboul added that Europe was “clearly ready” to receive new sources of LNG. He said that in western Europe, the load factor of the existing facilities was running at around 30%.
“So there is plenty of room in the existing regasification facilities,” he said.
As an example, he said that the long-term contracts signed by customers in Spain meant that Cheniere LNG from the US would supply 30% of the gas market in Spain.
And the long-term contracts signed by Cheniere in Europe, amounting to some 16 million mt/year, represent 5% of the total European gas market.
