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Gold/Mining/Energy : Oil & Gas Exploration & Production Co.'s

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To: Ed Ajootian who started this subject6/2/2003 10:23:39 PM
From: Ed Ajootian  Read Replies (1) of 112
Small US LNG Player Cheniere Thinks Big
(Copyright © 2003 Energy Intelligence Group, Inc.)
World Gas Intelligence Wednesday, May 21, 2003

Tiny Cheniere Energy's award this week of a front-end engineering design (Feed) contract to Kansas City-based Black & Veatch (B&V) could one day yield the two largest LNG terminals ever built in the US -- each a merchant facility able to handle around 2 billion cubic feet per day of gas (15 million tons per year of LNG), twice the size of any existing US terminal.

Cheniere yesterday announced that B&V would do engineering for both a Corpus Christi, Texas, and a Sabine Pass, Louisiana, site in preparation for a January filing with the Federal Energy Regulatory Commission (FERC).

Each site fits Cheniere's ideal profile for new terminals: industrial areas close to major pipeline hubs, where landowner concerns are expected to be minimal (WGI Jun.20'01,p2). Like CMS' Lake Charles terminal, these sites are close enough to big enough pipelines that -- thanks to blending -- the high Btu content of gas coming from LNG supply sources other than Trinidad poses no real problem.

The Corpus Christi facility is to be developed through a partnership with a limited liability affiliate of Sherwin Alumina, a neighboring bauxite refinery. Cheniere would be operator and 70% owner. The site is next to the deepwater La Quinta Channel, where LNG tankers could dock easily. The terminal would also house three 3 Bcf storage tanks.

The Sabine Pass project is currently 100% owned by Cheniere, a Houston-based upstream independent that ventured into the LNG business just three years ago.

Cheniere also has a 30% stake in Freeport LNG, a project 60% owned by tightly held Freeport Investment and 10% by Contango Oil & Gas, that aims to bring 1 Bcf/d of LNG into Freeport, Texas -- and for which an application was filed with FERC last month.

Contributing to the proliferation of LNG sites on the US Gulf Coast -- including Sempra's Hackberry, Louisiana, and ChevronTexaco's offshore Port Pelican sites -- Cheniere has an option on a fourth site in Brownsville, Texas. However, this is expected to take a back seat.

Cheniere Chief Executive Sharif Souki foresees a 10 Bcf/d LNG import market developing in the US in short order, and he recently hired Keith Meyer, former head of LNG project development at CMS, to help his company grab a big piece of that action (WGI Mar.19,p.2).

Souki expressed confidence that Cheniere could have at least one terminal authorized and built by 2007, citing more flexible licensing procedures (WGI Jan.22,p1). "We have no intention of getting into the LNG chain as other than a terminal operator," he told WGI, adding: "We are currently talking to half a dozen potential customers and expect to have one lined up for Freeport soon."
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