Transcript Sabine Pass LNG - Committee of 100 Louisiana

Presentation to the Committee of 100
Sabine Pass LNG and Liquefaction
Pat Outtrim
Vice President – Government and Regulatory Affairs
February 8, 2012
Forward Looking Statements
This presentation contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1933, as amended. All statements, other than statements of historical facts, included
herein are “forward-looking statements.” Included among “forward-looking statements” are, among other things:
 Statements that we expect to commence or complete construction of a liquefaction facility by certain dates, or at all;
 Statements that we expect to receive authorization from the Federal Energy Regulatory Commission, or FERC, or the Department of Energy, or
DOE to construct and operate a proposed liquefaction facility by a certain date, or at all;
 Statements regarding future levels of domestic or foreign natural gas production and consumption, or the future level of LNG imports into North
America or exports from the U.S., or regarding projected future capacity of liquefaction or regasification facilities worldwide;
 Statements regarding any financing transactions or arrangements, whether on the part of Cheniere or at the project level;
 Statements regarding any commercial arrangements marketed or potential arrangements to be performed in the future, including any cash
distributions and revenues anticipated to be received;
 Statements regarding the commercial terms and potential revenues from activities described in this presentation;
 Statements that our proposed liquefaction facility, when completed, will have certain characteristics, including a number of trains;
 Statements regarding our business strategy, our business plan or any other plans, forecasts, examples, models, forecasts or objectives: any or all of
which are subject to change;
 Statements regarding estimated corporate overhead expenses; and
 Any other statements that relate to non-historical information.
These forward-looking statements are often identified by the use of terms and phrases such as “achieve,” “anticipate,” “believe,” “estimate,” “example,”
“expect,” “forecast,” “opportunities,” “plan,” “potential,” “project,” “propose,” “subject to,” and similar terms and phrases. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these
expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of
this presentation. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors,
including those discussed in “Risk Factors” in the Cheniere Energy, Inc. and Cheniere Energy Partners, L.P. Current Reports on Form 8-K filed with the
Securities and Exchange Commission, which are incorporated by reference into this presentation. All forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by these ”Risk Factors”. These forward-looking statements are made as of the
date of this presentation, and we undertake no obligation to publicly update or revise any forward-looking statements.
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In the Beginning…
 Cheniere Energy was formed in 1996 to fund an exploration project,
“the Cameron Project”, to evaluate, explore and develop drilling
prospects in southwest Louisiana
 Two gas discoveries were made – “Redfish” and “Stingray”
 By 1999 the company had licensed 8,800 square miles of seismic data
and reprocessed this data using cutting edge technology
 By the late 1990’s natural gas drilling was yielding less production per
well at higher costs suggesting gas production could not sustain the
growing U.S. demand and providing an opportunity to import LNG
 By 2001 Cheniere had assembled an experienced LNG project
development team to evaluate the economic feasibility of delivering
LNG to North America
 This team then began to evaluate suitable locations to construct one of
the first new LNG import terminals in more than 25 years
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U.S. Gas Pipeline System
Gulf Coast-centered transmission system reaches all US markets
Terminal
Capacity Holder
Canaport
Repsol
Canaport
Everett
Cove Point
Costa Azul
Elba Island
Gulf LNG
Lake Charles
Cameron
Sabine Pass
Freeport
Golden Pass
Altamira
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Everett - Suez
Baseload
Sendout
(MMcf/d)
1,000
700
Cove Point
BP, Statoil, Shell
1,800
Elba Island
BG, Marathon, Shell
1,800
Gulf LNG
Angola LNG, ENI
1,300
Lake Charles - BG
1,800
Freeport
ConocoPhillips, Dow, Mitsui
1,500
Sabine Pass
Total, Chevron, Cheniere
4,000
Cameron
Sempra, ENI
1,500
Golden Pass
2,000
ExxonMobil, ConocoPhillips, QP
Altamira
Shell, Total
Costa Azul
Shell, Sempra, Gazprom
Total
700
1,000
19,100
Sabine Pass LNG
 Operational since 2008
 Cost ~$1.6 billion
 Vaporization
– ~4.3 Bcf/d peak send-out
 Storage
– 5 tanks x 160,000 cm (16.9 Bcfe)
 Berthing / Unloading
– Two docks
– LNG carriers up to 267,000 cm
– Four dedicated tugs
 Land
– 1000 acres in Cameron Parish, LA
 Accessibility – Deep Water Ship Channel
– Sabine River Channel dredged to 40 feet
 Proximity
– 3.7 nautical miles from coast
– 22.8 nautical miles from outer buoy
 LNG Re-Exporting Capability
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5
Aerial view of Sabine Pass LNG Terminal
Cheniere in the Community
 Cheniere has invested over $6 million in surrounding
communities
 Major Projects: Johnson Bayou Rural Health Clinic,
Economic Development and Planning Office
 PILOT Program: Providing advance tax payments to
Cameron Parish in the aftermath of Hurricane Rita
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Sabine Pass LNG
The Shale Gas Revolution
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Global Natural Gas Reserves
TCF
U.S. Natural Gas Resource Base
3,000
• 2,612 TCF of total recoverable reserves
• 700 TCF recoverable shales
2,500
• 400 TCF of shales economical below $6/MMBtu
2,000
1,216 Tcf
Unconventional
1,124 Tcf
Conventional
1,500
1,000
Unconventional gas is abundant globally, but only the U.S. has
the technical capability to develop at present
Source: 2011 BP Statistical Review (Global Reserves); Advanced Resources International US Natural Gas Resources & Productive Capacity,
August 2010 (US Resource Base) ; MIT, The Future of Natural Gas, 2009 (shales economic below $6)
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Kuwait
Kazakhstan
Norway
Egypt
Malaysia
China
Australia
Indonesia
Iraq
Algeria
Nigeria
Venezuela
UAE
Saudi Arabia
Turkmenistan
Qatar
Iran
0
Russia
272 Tcf Proved
Reserves
US
500
U.S. Gas Consumption vs. Production




Since 2005 U.S. production growth ~ 4.9 Tcf vs. demand growth ~ 2.6 Tcf
Net imports declined ~1.6 Tcf (-50%) over the period
~ 1 Tcf production added each year since 2006
The U.S. is on pace to be a net gas exporter by mid-decade
Tcf
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Hot Summer &
Cold Winter
22.0
21.7
23.1
23.2
22.8
20
15
18.0
18.5
10
19.3
20.1
20.6
24.1
21.6
24.6
22.9
U.S. Gas Consumption
US Gas Production
U.S. Gas Production
5
0
2005
9
2006
2007
2008
Source: EIA historical, September 2011 Short-Term Energy Outlook (2011 data)
2009
2010
2011E
Resulting Productive Capacity Estimates Vast

Existing conventional production to
continue declining from current 40%
share of supply

Unconventional production, led by
gains in gas shales, projected to
achieve capacity of 50+ Bcf/d

Total North American productive
capacity 90+ Bcf/d by 2020
$5.50 to $7.00 HH Price
$6.50 HH Price
Unconventional gas is
currently a critical
component of U.S. supply
and will continue to grow
into the future
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Gas Substitution in Transportation Sector
Bcf/d
 U.S. NGV demand w/heavy subsidies would reach 4 Bcf/d
by 2032 – 21 years (EIA forecast)
 Louisiana gas production +4 Bcf/d in 2 years
 U.S. gas production +4 Bcf/d in 1 year
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US Production Change Since 2005
NGV Demand AEO 2011
40
NGV Demand High Subsidy
30
Actual
Projected @
$7/Mcf
~40 Bcf/d Surplus
with NGV Subsidy
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10
0
2005
2010
2015
2020
2025
2030
2035
Production Data: EIA (2005-2010), Advanced Resources Intl "US Natural Gas Resources and Productive Capacity
mid-2010 Update" (Post-2010), August 2010.
NGV Data: EIA AEO 2010 Alternative Case – “Natural gas as a fuel for heavy trucks” 2027 Incentive Phaseout Case
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Gas Use in US Power Generation Sector
Bcf/d
 $4 gas prices have caused ~2.5 Bcf/d of coal switching – not
sufficient to absorb supply growth
 Near-term switching limited by 40+ GW of modern coal &
renewables due online thru 2015
50
US Production Change Since 2005
NCI Spring 2010 Carbon Plus Case
40
EIA AEO 2011 Reference Powergen
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Actual
~26 Bcf/d
surplus with
CO2 limits
Projected @
$7/Mcf
20
10
0
2005
2010
2015
2020
2025
2030
Production Data: EIA (2005-2010), Advanced Resources Intl "US Natural Gas Resources and Productive
Capacity mid-2010 Update,“ August 2010 (Post-2010).
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Powergen Data: EIA AEO 2011 Reference Case; Navigant Consulting Inc.’s Spring 2010 Reference Case,
"Market Analysis for Sabine Pass LNG Export Project", August 23, 2010
2035
Sabine Pass LNG
The Future
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Proposed SPL Project:
Brownfield Development Utilizing Existing Assets
Current Facility
Existing
operational
facility






1000 acres in Cameron Parish, LA
40 ft ship channel 3.7 miles from coast
2 berths; 4 dedicated tugs
5 LNG storage tanks (17 Bcf of storage)
4.3 Bcf/d peak regasification capacity
5.3 Bcf/d of pipeline interconnection to the
US pipeline network
Liquefaction Expansion
Proposed
expansion
 Construction contract w/Bechtel for Phase 1
 Up to four liquefaction trains designed with
ConocoPhillips’ Optimized Cascade®
Process technology
 Six GE LM2500+ G4 gas turbine driven
refrigerant compressors per train
 Gas treating and environmental compliance
 Modifications to the Creole Trail Pipeline for
bi-directional service
 Sixth tank if needed for fourth train
Significant infrastructure in place including storage, marine and pipeline interconnection facilities;
pipeline quality natural gas to be sourced from U.S. pipeline network
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Sabine Pass Liquefaction
Infrastructure and Jobs
 Infrastructure Investment ~ $10 B including
– $2.3 B materials & equipment
– Over $2 B potential U.S. sourced equipment
– More than $1 B construction wages/benefits
 Direct Jobs
–
–
–
–
100-200 permanent jobs at the terminal
Average construction jobs of 1,800 for four to six years
Peak of 3,000
13 million man-hours
 Indirect Jobs
– Will support ~50,000 permanent jobs in natural gas industry
– Construction timeline 2012-2018
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Sabine Pass Liquefaction
Approximate Project Timeline – Trains 1 & 2
NEPA Notice
(beginning of 6 month
consultation period w.
FERC)
Public
Announcement
2010
DOE
Authorization to
export LNG to
non-Free Trade
countries
Initial discussions with
local, political, and
regulatory constituents
Commence
Full
Commercial Bidirectional
Service
Sales
Purchase
Agreements
Signed
2011
2012
File FERC
Application
Initial commercial
discussions with
counterparties under CA
Full Notice to
Proceed for EPC
FERC
Authorization
to Commence
Construction
File DOE
Applications to
export LNG
produced in USA
DOE Authorization
to export LNG to
Free Trade
countries
2015
FEED
Complete
All
Permits
granted
Start up
Liquefaction
Train 1
Obtain
construction
financing
commitments
Train 2 will start up 6 to 9
months after Train 1.
Trains 3 and 4 start up will
be similarly staggered.
As of January 2012
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NOTE: Timeline represents an estimate of expected events and is continually changing.
Actions outlined in red are completed.
Sabine Pass LNG
The Case For LNG Exports
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U.S. LNG Export Projects
Jordan Cove
Cove Point
Freeport
Lake Charles
Corpus Christi
Gulf LNG
Cameron
Sabine Pass
Company
Capacity
(Bcf/d)
DOE
Filing
FERC
Filing
Sabine Pass
Liquefaction
2.2


Corpus Christi
Liquefaction
1.8
Freeport LNG
Expansion
2.8

Lake Charles
Exports
2.0

Dominion
Cove Point
1.0

Jordan Cove
Energy Project
1.2

Cameron LNG
1.7

Gulf Coast
LNG Export
2.8

* FERC Pre-Filing Process
Export Terminals
Source: Office of Oil and Gas Global Security and Supply, Office of Fossil Energy, U.S. Department of Energy;
U.S. Federal Energy Regulatory Commission
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*
*
Jan-04
Mar-04
May-04
Jul-04
Sep-04
Nov-04
Jan-05
Mar-05
May-05
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Attractive Oil Linked Market Prices
Spread between oil linked and U.S. natural gas prices
averaging $9–$11/mmbtu
$/MMBtu
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Source: PIRA, Platts
Regional Natural Gas & LNG Prices
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NBP
IFERC HH Monthly
Japan avg LNG
European Gas Contract
~ 12% – 15%
of Oil Prices
$14.97
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$12.45
$9.51
6
$3.85
0
Europe - LNG Import Terminals (Bcf/d)
2009 LNG Imports
6.8 Bcf/d
UK & Ireland
7.68
LNG Terminals (Bcf/d)
2
3.42
2009
2015
NW Europe
5.92
Mediterranean
5.46
2.39
3.11
10.14
2009
20
2015
2.53
2009
2015
Existing
16.09
Firm
7.50
Proposed 19.06
Total
42.65
Current
Importers
Potential
Importers
Belgium
Bulgaria
France
Croatia
Greece
Cyprus
Italy
Germany
Netherlands*
Ireland
Portugal
Poland
Spain
Romania
Turkey
Sweden
UK
Ukraine
Asia – Emerging Markets
TurkmenistanChina Pipeline
+3 Bcf/d
China West-East
#2 Pipeline
+2.9 Bcf/d
Central Asia
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Proved*
131
22.5
1.1
2.5
26
2009
2020
LNG Terminals (Bcf/d)
Existing
India KJV
Pipeline
+2.8 Bcf/d
Unconventional Gas
Potential
Proved Reserves (Tcm)
Major Pipelines
21
Krishna
Godavari
Basin
Under Construction
Planned
Regas Terminals in Latin
LNG Terminals (Bcf/d)
Existing
17
Firm
Proposed
Pipelines
6.4
13
Existing
Under Construction
Proved Reserves (Tcf)
0.5
3.4
2009
22
234
2015
Current Importers
Potential Importers
Argentina
Brazil
Chile
Dominican Republic
Mexico
Puerto Rico
Honduras
Jamaica
Uruguay
Source: BP Statistical Review 2011, Cheniere Research
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Expanding U.S. Natural Gas Exports Will…
 Promote stability in domestic natural gas pricing by raising
domestic natural gas productive capacity; and
 Stimulate state, regional and national economies through
job creation, increased economic activity and tax revenues,
including the direct creation of approximately 3,000
engineering and construction jobs during the course of the
project and, indirectly, 30,000 - 50,000 permanent jobs in the
exploration and production sector
 Reduced reliance on foreign sources of oil by promoting
domestic production of petroleum and by encouraging the
drilling of wells in areas where there is a significant amount of
natural gas associated with crude oil and natural gas liquids
(“NGL”)
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Expanding U.S. Natural Gas Exports Will…
 Improve U.S. balance of payments through the exportation of
approximately 2 Bcf/d of natural gas valued at approximately
$5 billion, and the displacement of $1.7 billion in NGL imports
thus furthering the President’s National Export Initiative
 Promote liberalization of the global natural gas trade
through the fostering of a global, liquid market, based on prices
cleared in free and openly traded natural gas markets
 Advance national security and the security of U.S. allies
through diversification of global natural gas supplies
 Increase economic trade and ties with foreign nations,
including neighboring countries in the Americas, and displace
environmentally damaging fuels in those countries
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