Cheniere Delays First LNG Shipment

The first cargo of LNG to leave the United States will be delayed, said exporter Cheniere Energy on Thursday. Cheniere now forecasts that its first shipment will not leave its Sabine Pass plant until late February or March 2016, a slip from a planned January departure.

Construction of the first liquefaction train at the terminal was completed ahead of schedule, Cheniere said, but the firm said that new instrumentation issues discovered during commissioning will take several weeks to address.

"We are now expecting the first cargo in late February or March," said Neal Shear, Interim President and CEO. "Construction for Trains 2-5 continues to be on an accelerated schedule and these trains are expected to come on-line on a staggered basis.”

Contractor Bechtel said that it has been “continually working towards completing the first unit and working through a few items that will provide assurance to Cheniere Partners that plant reliability and performance will be as expected. These last few items are in final resolution and full LNG production is planned for late February 2016."

The Sabine Pass facility is intended to reach a total production and export capacity of nearly 30 million tons per annum of LNG through completion and phase-in of six liquefaction trains.

Cheniere already has sale and purchase agreements for about 20 million tons per annum.

The investment community has watched Cheniere's progress towards completion and commissioning of Sabine Pass with great scrutiny, down to the employment of remote imaging to track Train 1's progress.

In the U.S. Energy Information Administration's weekly natural gas review released January 14, the agency forecast that the U.S. will become a net exporter of natural gas by mid-2017, driven in part by Sabine Pass and the planned addition of new LNG export capacity. The net export would be the first since 1955.

“EIA's forecast includes the beginning of operations at the Sabine Pass LNG export facility in Louisiana, with exports of domestically produced natural gas expected to start in the first quarter of 2016, and expand through 2017 as more of the facility's liquefaction capacity enters service. Additionally, with the expansion of infrastructure at the U.S./Mexico border, as well as within Mexico, U.S. exports to Mexico reached record levels in 2015, and the growth in U.S. exports to Mexico is forecast to continue,” the agency said.

On Wednesday, Lithuanian natural gas firm Lietuvos Energija put off the purchase of Cheniere's gas pending further analysis, claiming that it differs from the Russian gas it uses now.

"We are not buying gas from the U.S. at the moment, because the gas they are offering at the moment does not meet specifications needed for our gas distribution system," said spokeswoman Ernesta Dapkiene. "They are still testing their liquefaction equipment, and at the moment they cannot ensure the chemical composition of gas which is needed for Lithuania . . . We believe that once the testing phase is over they will be able to meet our specifications.”

Cheniere's board indicated a scaleback of the firm's expansion plans in December through the dismissal of CEO Charif Souki. Activist investor Karl Icahn, who controls a 14 percent stake in Cheniere and has two representatives on its board, issued a statement following the board’s action.

“There is no doubt that Charif Souki has proven that he is a talented entrepreneur but at this time there is also little doubt that the board wished to move the company in a direction that differed greatly from the path Mr. Souki wanted,” Mr. Icahn said.

As CEO, Souki had pushed for continued construction of LNG trains to expand the company's market share. “I wanted to do 14 trains by 2025, add one every year . . . They felt it was more prudent to slow down” and avoid more risk, he told media. “I don’t have an issue with the strategy.”