3rd Leg Trading

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Sabine Pass Train 4 reaches substantial completion

The recently announced expansion of the Sabine Pass liquefied natural gas (LNG) terminal in Cameron Parish, Louisiana, will add to the rapid growth expected in LNG export capacity for the United States under construction through 2019. The fourth natural gas liquefaction unit—referred to in the industry as a train—at the Sabine Pass LNG terminal is substantially completed, according to an October 13 announcement by Cheniere Energy, Inc., which owns and operates the facility. Train 4 has the capacity to liquefy 0.7 billion cubic feet of natural gas per day (Bcf/d). Cheniere expects to begin commercial deliveries from Train 4 in March 2018.

All of Train 4’s capacity has been contracted under 20-year long-term contracts: 0.5 Bcf/d to India’s state-run natural gas company, GAIL (India) Limited, and the remaining volumes to Shell and Cheniere’s global portfolios for trading in the spot LNG markets. GAIL is one of India’s largest LNG importers, with 1.1 Bcf/d of LNG imports in 2017 (44% of India’s total LNG imports).

GAIL’s contract with Cheniere for off-take volumes from Train 4 includes a swap agreement with Swiss trading company Gunvor Group Ltd. Under this agreement, GAIL will purchase 15 LNG cargoes from Gunvor in 2017 for delivery to India, and Gunvor will purchase 10 cargoes from GAIL in 2018 from GAIL’s off-take volume from Sabine Pass Train 4 for trading in the global spot markets. In a form of commercial agreements typical at Sabine Pass, GAIL will pay between $3.00 per million British thermal unit (MMBtu) and $3.50/MMBtu plus 115% of the final settlement price for the New York Mercantile Exchange (Nymex) Henry Hub natural gas futures contract price for the month in which the cargo is scheduled for delivery.

The Sabine Pass LNG terminal began export operations in February 2016 and currently has five trains in service or under construction, each with a capacity of about 0.7 Bcf/d. Trains 1-3 are fully operational, Train 4 is preparing to enter service as announced, and Train 5 is under construction and expected to enter service in August 2019. Train 6 has been approved by the Federal Energy Regulatory Commission (FERC), but has not yet reached a Final Investment Decision and is not yet under construction.




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