Cheniere Energy plans second U.S. natural gas export plant

12 20, 2011 by Fuel Fix

Cheniere Energy Inc. (LNG), the liquefied natural gas importer that Standard & Poor’s has said is on the verge of default, announced plans for a gas-export plant in Texas, the company’s second proposed terminal to ship U.S. supplies of the fuel overseas.

The project would be located in San Patricio County, near Corpus Christi, Texas, on a site Cheniere previously designated for an import terminal, the Houston-based company said in a statement today. No construction timeline or cost estimate was provided for the plant, which Cheniere said will handle 13.5 million tons of gas annually.

Chief Executive Officer Charif Souki has been selling shares to investors and signing sales agreements with French, Indian and British energy companies to stave off a cash crunch and attract financing for a proposed gas-export terminal in southwest Louisiana.

New drilling techniques have created a glut of North American gas that has depressed prices and triggered interest in exporting the fuel to more lucrative European and Asian markets. Royal Dutch Shell Plc (RDSA) and Apache Corp. (APA) are among the energy companies exploring the possibility of shipping North American gas overseas.

The Texas project could attract interest from gas producers such as Anadarko Petroleum Corp. (APC) and Chesapeake Energy Corp. (CHK) that operate in a nearby geologic formation known as the Eagle Ford Shale , said Eliecer Palacios, an energy specialist at Maxim Group LLC.

Capacity Demand

Last month, Cheniere said the first phase of its Louisiana plant will cost $4.5 billion to $5 billion. At that rate, the Texas facility would cost $7.49 billion, based on Bloomberg calculations. Cheniere expects ample demand for capacity at the Texas site amid surging gas production in the Eagle Ford region about 60 miles (100 kilometers) northwest of the proposed export facility, according to the statement.

Cheniere’s cash and near-cash equivalents fell 19 percent to $131.3 million during the three months that ended on Sept. 30, according to a filing with the U.S. Securities and Exchange Commission.

“Assuming its current liquidity does not materially improve, Cheniere will not be able to make its 2012 maturity payments,” Mark Habib, an analyst at S&P, wrote in an Oct. 31 report.

Annual Losses

Souki said in an Oct. 31 interview that he won’t miss a $298 million debt payment due in May because the company will refinance its debt in the meantime. Cheniere has lost money for 15 consecutive years, according to data compiled by Bloomberg.

Cheniere advanced 0.6 percent to $8.36 at the close in New York. The stock has risen 51 percent this year.

The plant would super-chill gas to reduce it to liquid form so it could be stowed on tankers for shipment to markets inaccessible by pipelines.

Other Eagle Ford gas producers that may be interested in shipping fuel through the proposed Cheniere plant include Pioneer Natural Resources Co. (PXD) and Plains Exploration & Production Co. (PXP), Palacios said today in a note to clients.

Cheniere already operates a gas-import terminal in southwest Louisiana. Such terminals have languished as the surfeit of domestic gas negated demand for foreign liquefied natural gas.