UPDATE 2-China, Singapore wealth funds invest $1 bln in US LNG export plant-source

Tue Aug 21, 2012 4:22am EDT

* Cheniere has US nod to build first LNG export plant in a generation

* Blackstone early backer of Cheniere

* New "fracking" technology generates cheap U.S. gas supply

* U.S. gas spot prices offer arbitrage play for Asian investors

* Cheniere has signed LT contracts with BG Group, KOGAS among others

By Stephen Aldred

HONG KONG, Aug 21 (Reuters) - The sovereign wealth funds of China and Singapore have invested a combined $1 billion in a U.S. plant that will export cheap liquefied natural gas (LNG) to Asia, a source said, becoming the latest Asian institutions to tap into the gas boom in the United States.

China Investment Corp and the Government of Singapore Investment Corp have pumped in around $500 million each in U.S.-based Cheniere Energy Partners LP's planned liquefied natural gas (LNG) export plant, a source with knowledge of the matter said on Tuesday.

Asian buyers have been eagerly eyeing U.S. LNG development opportunities in hopes of obtaining cheap gas, and buyers from top LNG importer Japan, South Korea, and India have already signed up for U.S. exports.

Cheniere Energy is building a $5.6 billion project in Sabine Pass, Louisiana. The project, expected to be ready by 2015, will be the United States' first LNG export plant since 1969.

New technology has opened up supply of natural gas from previously inaccessible shale fields in the U.S., altering the global dynamics of the industry, and turning the country from an importer to a potential exporter.

The new technology, known as fracking, releases natural gas trapped in tight layered rock formations by injecting high-pressure water, sand and chemicals.

Houston-based Cheniere has been seeking funds to start construction for the plant that is ideally located to ship LNG.

Cheniere has already signed long-term commercial contracts to supply gas to BG Group, gasNatural Fenosa, GAIL (India) Limited and Korea Gas Corp, according to documents on its website.

CHEAPER U.S. GAS

Spot LNG prices in Asia are currently around $13 per million British thermal units (mmBtu), while U.S. gas prices have been pushed to 10-year lows below $3 per mmBtu this year due to the sharp rise in shale gas production in recent years.

News of CIC's deal comes at a time of increased focus on China's investment in the energy sector in North America. Last month, China's state-owned CNOOC Ltd launched an agreed $15.1 billion takeover of Canadian oil producer Nexen Inc , in what is set to be China's biggest ever overseas acquisition.

Asian state-owned companies have stepped up purchases of overseas energy assets as they scramble to secure energy resources required to support their economic growth.

In June, Malaysian state oil company Petronas launched a C$4.8 billion takeover of its Canadian joint-venture partner Progress Energy Resources Corp.

Cheniere Energy has already seen strong interest from Asia-based institutions. In May, Singapore state investor Temasek Holdings and Asia-based private equity firm RRJ Capital agreed to invest $468 million in the company.

Private equity firm Blackstone Group LP was one of the early backers of Cheniere, when it agreed to invest $2 billion into the company in February.

The Financial Times, which first reported the investment but gave no deal value, said Blackstone advised CIC on the deal. CIC will have no direct influence on Cheniere, the report added. China's $482 billion fund is likely to escape scrutiny with its latest purchase as it is co-investing along with other institutions, the report added.

A CIC spokeswoman declined to comment, while Blackstone and GIC were not immediately available for comment. The source declined to be identified as the details of the deal were not public.

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