IIR Natural Gas Analyst: Cheniere ‘in it for the Long Haul’ as it Clears Hurdles for Sabine Pass, Corpus Christi LNG Projects
A global overabundance of liquefied natural gas (LNG) is diminishing prices and proving tricky for Cheniere Energy (NYSE:LNG) (Houston, Texas), which began exporting the product earlier this year. Although the company lost just shy of $300 million in the second quarter of 2016, compared with a loss of about $118 million in the same period last year, executives are optimistic that demand for LNG will strengthen in coming years and that the company's long-term agreements with customers will begin to pay off in spades.
Industrial Info's project database is tracking $36.8 billion in active Cheniere projects, all but $1 billion of which are located at the Sabine Pass and Corpus Christi facilities in Texas.
"LNG exporting is for those in it for the long haul," said Chris Easley, research manager of North American Oil & Gas for Industrial Info. "This is a product that is sold in 20-year tolling agreements, usually to large, foreign utility companies. A few years of depressed pricing after a term of over-inflated pricing is not going to hold back the companies and investors that are looking for solid growth over the long-term.
“LNG is growing in two fronts; one, of course, is the millions of metric tons per year to be exported to foreign countries; the other are the micro-producers that measure the product in thousands of gallons a day. These companies sell to fleets such as trucking, marine and drilling needs. Hopes are that more rail and aircraft needs will emerge in the future. Some of the micro-LNG producers are establishing service stations in a 15- to 20-mile radii from their production sites. I see that there is a lot of money to be made in LNG moving forward."
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