Exporting US natural gas as LNG

Cheniere Energy has received an order from the U.S. Department of Energy (DOE) with authorization to export domestically produced natural gas from the Sabine Pass LNG terminal as liquefied natural gas to any country.

Under the order, Sabine Liquefaction received long-term, multi-contract authority to export up to the equivalent of 16 mtpa (million metric tons per annum) of domestically produced natural gas as LNG. With the unprecedented growth in unconventional reserves, supply of natural gas continues to outpace demand dramatically. The forecast of long-term prices is also low. US LNG could be attractive as its price will not be indexed to oil prices.

There are currently an estimated 3,500 wells that have been drilled but not completed with the potential to continue to boost production. The U.S. has an opportunity to become a significant supplier in the global energy markets.

Sabine Liquefaction will contemplate making a final investment decision to commence construction upon, among other things, entering into acceptable commercial arrangements, receiving regulatory authorization to construct and operate the liquefaction assets and obtaining adequate project and equity financing. Based on current estimates, construction is expected to commence in 2012 with operations commencing as early as 2015.

To date, Sabine Liquefaction has entered into non-binding MOUs for an aggregate of up to 9.8 mtpa of processing capacity, well exceeding the targeted capacity of 7.0 mtpa to complete the first two trains. Sabine Liquefaction has begun the process of converting the MOUs into definitive agreements whereby customers will secure their processing capacity under long-term take-or-pay contracts. For those customers that are still in preliminary discussions and have not signed an MOU, Sabine Liquefaction will proceed directly to negotiating definitive agreements. Given the level of interest in the project, it is expected that all four trains will be constructed with one train completed every six to nine months beginning in the first half of 2015.

Summary Project Timeline

Milestone

Estimated Completion

DOE export authorization

Approved

Enter into definitive commercial agreements

Mid 2011

EPC contract

2H2011

Financing commitments

2H2011

FERC construction authorization

2012

Commence construction

2012

Commence operations

2015

Cheniere expects to take advantage of the existing infrastructure at the Sabine Pass terminal to offer customers bi-directional services at attractive pricing. Based on preliminary estimates, the expected fee for bi-directional services will be approximately $1.40/MMBtu to $1.75/MMBtu. This added service would provide customers with an attractive option to source natural gas supply from the U.S. pipeline grid at prices indexed to Henry Hub.