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

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To: Ed Ajootian who wrote (69)6/2/2003 10:37:28 PM
From: Ed Ajootian   of 112
Cheniere Hires CMS' LNG Guru To Implement Gulf-Based Strategy
(Copyright © 2003 Energy Intelligence Group, Inc.)
Natural Gas Week Monday, May 12, 2003

Determine d to capitalize on what it sees as a 10 Bcf/d liquefied natural gas (LNG) import market in the near future, Cheniere Energy has hired on one of the industry's big guns to head up its LNG division.

The Houston-based company said late last week that Keith Meyer, who formerly headed up LNG operations for CMS Energy, the owner and operator of the Lake Charles, Louisiana, LNG import terminal, will join Cheniere as president of its Cheniere LNG subsidiary. The personnel change will take place as soon as the sale of the CMS Panhandle pipeline unit to Southern Union is complete, Cheniere said.

"Cheniere is an attractive company to me because they are very focused in the development of LNG terminals and have secured some of the highest quality sites I have seen. A properly executed plan, and one which I intend to see to fruition, will see Cheniere becoming North America's premier LNG gateway," Meyer told Natural Gas Week.

Cheniere, once a typical and little-known small producer in the Gulf region, has muscled into the LNG business to compete with the better-financed majors and integrated companies (NGW Jun.18, '01,p1).

Cheniere and other independents face increasingly high production costs on the shallow water shelf Gulf of Mexico and fewer prospects. At a recent New York conference, Charif Souki, Chenier's chairman, cited a $4/Mcf gas price as necessary to justify further exploration there.

Souki sees a need for up to six new receiving terminals in the US. After searching for potential import terminal sites, Cheniere has set its sights on four potential locations all catering to the Gulf Coast market.

"It's the home of numerous industrial and gas consuming facilities, it's close to any number of major pipeline systems…[and] the atmosphere is just more friendly to industry. You will never see a receiving terminal in New York Harbor," Souki said.

Souki does not view as particularly promising for a company of Cheniere's size the Florida gas market, which companies such as Tractebel and AES are considering as targets for a Bahamas-based LNG facility. "Unless you have a contract with Florida Power and Light, it's difficult to bring gas into that market," he said.

As a LNG terminal operator, Cheniere is aiming for maximum flexibility for potential users of any proposed facilities. The Freeport, Texas, LNG terminal -- 30% owned by Cheniere, 60% owned by privately held Freeport Investment, and 10% owned by Contango Oil & Gas -- met all of Souki's specifications and was the first to be announced (NGW Jun. 25, '01,p8). Within a 60-mile radius of Freeport's numerous industrial parks, Souki is eyeing a 6 Bcf/d market.

The other sites for which Cheniere has secured options for LNG receiving terminals are Corpus Christi and Brownsville, Texas, and Sabine Pass, Louisiana. Like CMS's Lake Charles terminal, these sites are located either in primarily industrial areas or close enough to major pipeline hubs where high Btu content gas coming from LNG supply sources other than Trinidad is not an issue as it is with the Elba Island, Georgia, Cove Point, Maryland, and Everett, Massachusetts, LNG terminals.

There have been several key LNG developments for Cheniere in the past few months. Most recently the company filed for the Freeport terminal with the Federal Energy Regulatory Commission (FERC) and could make its next filing with FERC to build a second LNG facility early next year.

Given the number of developments on the regulatory front in the past six months, Souki expressed confidence that at the very least one of the four terminals could be authorized and built by 2007, citing a streamlined permitting process for offshore LNG receiving terminals by the Coast Guard, which gained jurisdiction from FERC in November, and FERC's decision in December to allow the construction of proprietary receiving terminals (NGW Dec. 23, '02,p1).

However, the Cheniere terminals would not be proprietary. "We have no intention of getting into the LNG chain as other than a terminal operator," said Souki, leaving the production, liquefaction, shipping, and marketing side to its future customers. "We are currently talking to half a dozen potential customers and expect to have one lined up for Freeport soon," said Souki. He declined to name specific contenders.

A further indication of how seriously Cheniere is taking its commitment to LNG can be seen in its recent decision to change its American Stock Exchange listing to LNG, from CXY.

--Madeline Jowdy
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