Capstone Green Energy Corp (fka CGRNQ)

[Seasound]

Interesting question, especially since CNOOC bought the land and oil and gas rights in the Eagle Ford Play from Chesapeake Energy.

Cheniere's entire output for the first 4 trains has already been sold forward and the Chinese are not in that queue, but that doesn't mean that they aren't in the game. CNOOC has invested 1/2 billion dollars in the Sabine Pass facility.

Cheniere's first long term deal (20 years) with British Gas (BG) sheds some light on how exported gas may be priced in the future although the article is a year old. The following excerpt will shed some light on it:

Herring, whose firm called the deal a "game-changer" earlier this week, explained that the SPA's purchase terms are telling. Under the agreement, Cheniere will be paid $2.25 per thousand British thermal units (MMBtu) sold and will sell the LNG to BG for 115 percent of the Henry Hub natural gas benchmark price. Herring points out the SPA clarifies something that until last week had confounded players in the global LNG market: the price of U.S.-sourced LNG. As this table shows, the daily Henry Hub spot price has remained in the $3.40 to $4.00 range for much of the past two months. On the day of BG and Cheniere's announcement, it was $3.65. Using that price from October 26 as an example, one can easily determine that the price of LNG from the U.S. is $6.45/MMBtu free-on-board (pre-shipping).

"The SPA's purchase terms of [1.15% HH + $2.25] reveal insight into the capital cost and the direct cost of energy, which are the core intrinsic costs—directly relating to the plant and its operations," Herring said. He added that other costs in the LNG trade include the cost of gas—very transparent in the U.S. market—and the cost of shipping, which corresponds to distance to market.

Using the Henry Hub pricing basis or structure for U.S. LNG export pricing also marks a new direction for the LNG sector.

There are incredible arbitrage opportunities between LNG and oil. One point to remember is that the daily charter rate of the current crop of LNG Carriers (LNGC) 120-150 thousand cubic meters is running about $140,000 per day down from $170,000 several months ago.