November 25, 2016 / 9:31 AM / 3 years ago

Cheniere to send first LNG supplies to Asia as soon as next month: official

(Reuters) - Houston-based Cheniere Energy Inc is gearing up to send its first supplies of liquefied natural gas (LNG) from its Sabine Pass export terminal on the U.S. Gulf Coast to Asian customers as a rise in prices in the region have made such shipments profitable, an official told Reuters.

The plans signal how the U.S. shale gas revolution is sending ripples across the globe and suggest regional markets, once disparate on pricing, are starting to align. Asian spot LNG prices for the supercooled fuel, while low compared to 2014, were last quoted at $7.30 per million British thermal units, up from as low as $4 in April.

Even as mega-projects in Australia ramp up production, the higher prices mean it has become commercially viable to send shipments from the U.S. Gulf Coast through the enlarged Panama Canal and across the Pacific. Shipping big LNG cargoes to Asia became possible after the expansion of the Panama Canal in June.

“Recently because of the pick-up in Asian LNG prices to above $7 we can start to deliver to north Asia,” the official told Reuters on Friday, requesting anonymity because supply details have not been finalised. “At the current market level it is a good price.”

The cargoes will be delivered in the next one or two months, with China or South Korea the most likely destinations in North Asia, the official said.

Using the Panama Canal shaves distances between the Gulf of Mexico and Asia to about 14,500 kilometers (9,000 miles) from 25,600, allowing U.S. producers to better compete in one of the world’s biggest gas consuming markets.

The first LNG gas vessel from the lower 48 U.S. states headed from Sabine Pass for China in July, collected by Shell as part of its contracted offtake from the terminal.

The planned shipments disclosed by the official will be the first to Asia from Cheniere’s own gas supplies. The company owns and operates the terminal and has committed most of its output to other companies, such as Royal Dutch Shell.

Cheniere has more spare gas for its own sales after starting operations at the second LNG production plant at Sabine Pass, known as a ‘train’ in the industry, in September. Six trains will eventually be operating and freezing gas from U.S. shale fields to a liquid form for transport on ships.

“We are now commissioning the second train so we have more available cargoes to sell,” the official said.

Reporting by Aaron Sheldrick; Editing by Kenneth Maxwell

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