Cheniere signs LNG export agreement with GAIL (India)

Exports of U.S. LNG could be headed for India. Cheniere Energy Partners, L.P. (NYSE Amex: CQP) announced today that its subsidiary, Sabine Pass Liquefaction, LLC has entered into an agreement that will see GAIL (India) Limited purchase approximately 3.5 million tonnes per annum of LNG from liquefaction train four at the Sabine Pass LNG terminal. Prior to the commencement of train four operations, GAIL will purchase bridge volumes of approximately 0.2 mtpa upon the commencement of operations of train two.

Sabine Liquefaction is developing a liquefaction project at the Sabine Pass LNG terminal that would include up to four liquefaction trains capable of producing up to 18 mtpa of LNG. Sabine Liquefaction is targeting selling approximately 14 mtpa of the capacity under long-term agreements. The project is being developed in phases. Sabine Liquefaction recently announced that it has reached its targeted annual contract quantity of 7 mtpa for the first phase and is advancing towards making a final investment decision for the development and construction of two liquefaction trains. The SPA with GAIL represents the first contract for the second phase of the project, which will also include two liquefaction trains with combined production capacity of 9 mtpa.

Under the SPA, GAIL will purchase LNG on an FOB basis for a purchase price indexed to the monthly Henry Hub price plus a fixed component. LNG will be loaded onto GAIL’s vessels. The SPA has a term of twenty years commencing upon the date of first commercial delivery, and an extension option of up to ten years. Delivery of the bridge volumes are to occur with the commencement of operations of train two, which is expected in 2016 and deliveries from train four are to occur upon commencement of its operations, which is expected as early as 2017. The SPA is subject to certain conditions precedent, including but not limited to Sabine Liquefaction receiving regulatory approvals, securing necessary financing arrangements and making a final investment decision to construct the second phase of the liquefaction project.

“GAIL will join BG and Gas Natural Fenosa as the next foundation customer for our Sabine Pass liquefaction project. GAIL is India’s leading natural gas company and its largest shareholder is the Government of India,” said Charif Souki , Cheniere Energy Chairman and CEO. “We are building a strong portfolio of customers, consisting of energy companies engaged in the natural gas, LNG and power markets with operations spanning the globe. We continue to hold advanced discussions with additional global LNG buyers and expect to complete commercial discussions for the remaining capacity of the second phase of the project, train three, in the coming weeks.”

Commenting on the development, Mr. B. C. Tripathi, Chairman & Managing Director, GAIL ( India ) Limited said, “The SPA with Cheniere will help GAIL to ensure long term gas supply for the growing demand in the Indian market. This will be in addition to other initiatives being undertaken by GAIL which includes building captive LNG facilities in India and augmenting its transmission capacity from 175 MMSCMD to over 300 MMSCMD over the next two years. With an office established in Houston, GAIL has acquired shale gas assets in Carrizo’s Eagle Ford Shale acreage and is further looking for shale gas assets in the U.S.”

December 12, 2011