February 9, 2018 / 9:30 PM / 10 months ago

UPDATE 2-Cheniere closer to expanding Texas LNG site after China deal

(Adds Cheniere CFO comments, other companies seeking to build a new LNG terminal, other analyst comments)

By Scott DiSavino

Feb 9 (Reuters) - Cheniere Energy Inc said on Friday it has signed a deal to sell liquefied natural gas to China National Petroleum Corp (CNPC) from its Corpus Christi export terminal under construction in Texas, moving the top U.S. LNG company closer to expanding the site.

CNPC’s PetroChina International Co Ltd subsidiary will buy about 1.2 million tonnes per annum (mtpa) of LNG under two agreements with a portion of the supply beginning in 2018 and the balance in 2023, Cheniere said.

The deal should move Cheniere to the top of the pack of companies competing to build the next generation of U.S. LNG terminals to meet potential supply shortfalls in the early 2020s, analysts said. The company is currently the only major exporter of LNG in the lower 48 U.S. states.

The agreements continue through 2043 for the purchase of LNG indexed to the U.S. natural gas Henry Hub benchmark price.

Cheniere has two 0.7 billion-cubic-feet-per-day (4.5-mtpa) units under construction at Corpus Christi and one at Sabine Pass, in addition to the four 0.7-bcfd liquefaction trains in operation at Sabine Pass.

Cheniere also has other units that are fully permitted at both Sabine Pass and Corpus Christi, including train 3, that it plans to build once it obtains enough financial commitments.

“We have a very large platform at two separate sites in Texas and Louisiana and a lot of existing infrastructure. It’s a tough platform to compete with and we ought to be able to grow it,” Michael Wortley, Cheniere’s CFO, told Reuters in a phone interview.

Cheniere’s Sabine Pass terminal in Louisiana is currently the only big LNG export facility operating in the country. Several other companies are building other trains at six sites which is expected to make the United States into the third biggest LNG exporter by capacity in 2018.

Total U.S. export capacity is expected to rise to 4.6 bcfd by the end of 2018 and 9.4 bcfd by the end of 2019 from 3.0 bcfd now.

While many companies are competing to build the next generation of U.S. LNG export terminals, the combination of the CNPC deal and a deal announced in January to sell LNG to Swiss commodity trader Trafigura puts Cheniere in the lead.

“Since Cheniere has had a proven successful track record they are an attractive seller to these new buyers,” said Jason Lord, LNG analyst at energy data provider Genscape in Boulder, Colorado.

One bcfd can fuel about 5 million U.S. homes.

Analysts at Cowen & Co said in a note that Cheniere should generate about $4 billion in discretionary cash flow through 2021, enough to finance the roughly $2.5 billion cost to build train 3 at Corpus without project financing.

Cheniere shares were up 4.6 percent at $55.57 on Friday.

Reporting by Scott DiSavino in New York; Editing by Matthew Lewis and Marguerita Choy

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