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Cheniere Plans to Export U.S. Gas Into Caribbean Power Markets, CEO Says

Cheniere Energy Inc., the Houston- based liquefied natural gas terminal owner, said it plans to sell shale gas in the Caribbean to cut the region’s dependence on power generated from burning oil.

Jamaica, Puerto Rico and the Dominican Republic are among those that could save money by burning gas to generate electricity instead of crude oil-based products such as fuel oil, Charif Souki, the company’s chief executive officer, said in an interview in Barcelona last week.

Cheniere owns the Sabine Pass LNG terminal in Cameron Parish, Louisiana. The company said in June that the plant might become the first in the continental U.S. to export LNG, citing increased domestic production from unconventional gas and lagging demand. JPMorgan Chase & Co., which is boosting its LNG trading in North America, said in August the country may see more “development plans” for liquefaction facilities if low prices boost export demand.

“At some point we’re going to become more active a little bit further downstream,” Souki said. “I’m talking about selling gas to some of these countries with a financial partner,” he said, adding that the company has “an arrangement with JPMorgan at the moment.”

Global electricity generation from burning oil products equal as much as 50 billion cubic meters a year of potential gas consumption, according to Souki.

Andrew Slocum, executive director of LNG marketing and trading at JPMorgan’s global commodities unit, said last week in Barcelona that he’d be surprised if his company didn’t announce next year “something strategic and large in LNG.”

Physical Trading

JPMorgan’s commitment to LNG will focus on “physical trading, marketing and hard assets,” Slocum said. It won’t involve “upstream equity investment.”

The bank is now the second-biggest physical natural-gas marketer in North America behind BP Plc after it completed the purchase of the North American assets of RBS Sempra Commodities.

Cheniere’s Sabine Pass LNG terminal exported the first U.S. cargo of liquid gas to the U.K. reloaded from storage tanks last month. The shipment illustrates how the company’s business plan has changed since North America’s need to import gas via ocean- going tankers was negated by rising gas production from shale rock and other so-called unconventional sources.

“If you’d asked me two years ago: ‘Are you going to be a liquefier?’ I’d have said: ‘I’m not sure I understand your question,’” Souki said.

Provisional Agreements

The first phase in the company’s plans to export gas from as early as 2015 would include two liquefaction units with capacity of approximately 1 billion cubic feet a day. As many as four of the so-called trains to liquefy gas are planned, amounting to as much as 16 million metric tons of LNG a year.

Three provisional agreements have already been signed with Morgan Stanley, ENN Energy Trading Co. Ltd. of China and Gas Natural SDG SA of Spain for import and export capacity at Sabine Pass, Souki said.

The company plans to have definitive agreements for the first production train by April “subject only to a final investment decision and permitting,” Souki said.

The impact on local gas prices will be “minimal” and Souki said he doesn’t anticipate any serious political opposition to exports from the U.S. Exports of 1 billion cubic feet a day may create as many as 30,000 jobs, Souki said.

In a submission to the Department of Energy on Sept. 7, Cheniere said 2 billion cubic feet a day of LNG exports may increase gas prices by as much as 11 percent in 2015.

U.S. gas prices at Henry Hub in Louisiana have fallen 20 percent this year. Gas for January delivery rose 1.2 percent to $4.446 a million British thermal units in New York trading today as of 12:41 p.m. in London.

To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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