CAMERON PARISH, La. -- The first U.S. onshore liquefied natural gas terminal built in more than 25 years opened with great fanfare yesterday, but the ribbon-cutting might be the last activity at the facility for many months.
The Cheniere Energy facility has no LNG shipments under contract other than an inaugural tanker from Nigeria, and the company is expecting to lay off employees because the terminal construction is done.
Almost all LNG shipments these days are going to Europe and Asia, which are willing to pay more than the United States for natural gas. And that is with U.S. prices at about $10 per million British thermal units -- almost 38 percent higher than last year and unusually high for spring, when gas demand is low. Great Britain and Japan are topping the U.S. price by between $1 and $5 per million Btu.
Speaking to more than 100 people at the terminal's opening ceremony, Energy Secretary Samuel Bodman said the facility represented just $2 billion of $22 trillion needed in global energy investments by 2030. The new LNG gasification facility was needed, he said, even if gas was not immediately available.
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| The Cheniere Energy storage facility in Louisiana opened for business yesterday, but when business will take off is anyone's guess. Photo by Katherine Ling. |
Australia, Russia and Qatar are expected to bring about 9 billion cubic feet per day in liquefaction capacity in the next 18 months. But some exporting countries -- Indonesia and Malaysia, for example -- are expected to begin using more natural gas as their domestic demands grow.
So the terminal's opening was bittersweet for the Cheniere chairman and chief executive, Charif Souki. "We are, maybe, being penalized" for opening on-time, Souki said in an interview. "We are ready. The others are not."
Until now, everything had gone smoothly for Cheniere, which began as a $15 million company with 15 employees at a time when gas cost about $3 per million Btu.
The Cheniere Energy Sabine Pass LNG terminal was licensed and built in five years -- a model of efficiency that will be hard to match in a time of rising labor and material costs. The terminal received the Nigerian shipment on April 11 and successfully prepared and sent it down a new pipeline before the official opening started.
Cheniere has a stake in an LNG terminal in Freeport, Texas, which accepted its first shipment April 15. Cheniere sold majority ownership in that facility to ConocoPhillips to support construction of the terminal here.
A third LNG terminal, Excelerate Energy's Northeast Gateway offshore terminal, in Massachusetts, is expected to open next month.
Souki said he cannot account for delays in the construction of other liquefaction plants or unexpected changes in LNG supply and demand. He also insisted Cheniere would pay "reasonable prices," even if it meant keeping the plant here idle for a while. But he insisted the plant would not be mothballed.
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| The Celestine River was the inaugural ship from Nigeria that brought the first shipment of LNG to the storage facility. Photo by Katherine Ling. |
"We're going to be busy" when summer arrives and England, Japan and other countries with low storage capacity and seasonal low demand will no longer be taking LNG, Souki said.
"Gas is coming and we need an outlet," he said.
The United States has plenty of gas-storage space, which allows it to accept LNG during times of low global demand.
And Sabine Pass is still testing its operations and probably will be capable of taking four or five shipments a month by year's end. When its operation hits its stride, it should be able to take about 20 cargoes, Souki said.
"We are going to send price signals with the best of them," Souki said. "This is not a seasonal asset. This asset is going to be around for 50 years. Gas will come."
The momentary relief from the supply of unconventional gas sources coming into production will not last long as U.S. demand grows -- especially with legislation pending to set U.S. limits on greenhouse gas emissions, Souki said. With growing opposition to coal and with the construction of new nuclear plants many years off, he said the United States has little choice but to use more natural gas.
"We are in a natural gas crisis" when new domestic supply cannot make up for declining traditional sources, Souki said. "When the trouble comes," he added, "it is going to come in a hurry."
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