Cheniere signs for LNG facility

Bechtel Oil, Gas and Chemicals Inc. will design and build a multibillion-dollar natural gas export facility at the Sabine Pass LNG terminal in Cameron Parish under a contract announced Monday by Cheniere Energy Partners LP.

Officials with Cheniere, of Houston, could not be reached for comment Monday about the $3.9 billion liquefaction facility contract.

However, Cheniere chairman and Chief Executive Officer Charif Souki said in a news release that the firm chose Bechtel because of the company’s extensive experience in building some of the world’s largest liquefied natural gas facilities. San Francisco-based Bechtel has built roughly one-third of the world’s liquefaction capacity.

“We have worked with Bechtel in the past on the construction of our existing Sabine Pass LNG terminal, which was completed on time and on budget, and look forward to another successful project,” Souki said.

Cheniere subsidiary Sabine Pass Liquefaction LLC is planning liquefaction facilities that will allow the company to annually export up to 9 million metric tons, or roughly 438.3 billion cubic feet of LNG. Sabine plans to sell 340.9 billion cubic feet of that production under long-term sales agreements and has already signed an export contract for half of that amount with BG Gulf Coast LNG LLC.

The long-term contracts are part of Cheniere’s plan to secure financing for the project.

Cheniere said the total costs for the project, without financing charges, are estimated to be between $4.5 billion and $5.0 billion. The total includes an estimated $600 million to $1 billion for Cheniere’s costs and contingencies.

Cheniere has already spent $1.5 billion on the facility, which was planned in the 1990s, to handle imports of liquefied natural gas. At the time, domestic natural gas prices were double and triple the current price of around $4 per thousand cubic feet.

Cheniere said a final decision on building the export facility depends in large part on securing enough long-term contracts to finance the project.

Under the contract, Sabine Liquefaction would have to pay Bechtel between $1.0 million and $2.5 million to terminate the contract before giving notice to begin the work.

Sabine Liquefaction would have to pay Bechtel up to $30 million if the contract is terminated after ordering Bechtel to begin the work.

Cheniere said it expects to begin construction in 2012, and LNG exports could begin as early as 2015.

Cheniere estimates that the project will create more than 3,000 construction jobs at peak employment, and 100 permanent workers will be required to operate the liquefaction facilities.

The liquefaction units will be built next to the existing facilities at the Sabine Pass LNG terminal, whose five tanks can store the equivalent of 16.9 billion cubic feet of natural gas.

Shares of Cheniere Energy Inc., the parent company of Cheniere Energy Partners, closed Monday at $11.34, up 78 cents or 7.4 percent.