Cheniere Energy Inc. said Tuesday that it has already signed an agreement to supply LNG from a massive expansion of its Sabine Pass liquefaction (SPL) terminal in Louisiana just two months after it kicked off the federal permitting process.
CEO Jack Fusco told analysts during a call to discuss the company’s first quarter results that the 20-plus year deal to supply an investment-grade offtaker in Asia with 0.4 million metric tons/year (mmty) signals “early commercial momentum” for its SPL Stage 5 expansion project. Fusco said the company was not ready to share all of the details of the agreement, but he added that it would be contingent on sanctioning the 20 mmty project’s first train.
Along with existing capacity, and other expansions underway at its Corpus Christi liquefaction plant in South Texas, the SPL expansion would boost the company’s overall LNG output to nearly 80 mmty.
The latest deal builds on a bevy of contracts Cheniere signed last year when buyers scrambled to lock-in long-term LNG supplies. In all, the largest U.S. LNG exporter signed contracts to supply a combined 180 mmty of the super-chilled fuel through 2050.
The company has carried last year’s momentum into 2023. It loaded a record 167 cargoes (602 TBtu) during the first quarter from its two export plants in Texas and Louisiana. That’s up from 160 cargoes in the year-ago period and above the previous record of 166 cargoes (601 TBtu) set in 4Q2022.
Surging LNG demand since Russia invaded Ukraine and cut energy supplies to Europe has lifted Cheniere’s business. The company raised full-year earnings guidance Tuesday by $200 million to $8.2-$8.7 billion and it also lifted its forecast for distributable cash flow to $5.7-$6.2 billion over the same time.
The company’s earnings were lifted dramatically by spot cargoes it sold and hedged late last year when global gas prices were higher. Those gains were largely pulled forward into the first quarter results and earnings are expected to moderate as the year unfolds.
The company said global LNG production reached a record high in 1Q2023, helping to moderate gas prices in Asia and Europe, which are currently trading at pre-war levels last seen in late 2021.
Chief Commercial Officer Anatol Feygin noted, however, that very little new LNG capacity is expected to come online over the next 18 months.
“Until then, we expect supply and demand to be precariously balanced and sensitive to supply disruptions, weather and demand shocks,” he said.
In the near term, high storage inventories in Europe and record high LNG deliveries to the continent should weigh on prices. Healthy storage levels and higher nuclear availability are also expected to curb spot buying among Asia’s largest buyers like South Korea and Japan.
China’s first quarter LNG imports also declined 3% year/year, Feygin said, but the company is starting to see “green shoots” emerge in the country that could signal a stronger role in the global gas market later this year.
Feygin said China’s gas demand grew 5.6% in March amid gains in gross domestic product. LNG imports were up 14% in March – the first increase in more than a year as the country has leaned on domestic energy supplies and gas pipeline imports as it rebounds from the Covid-19 pandemic.
"Despite the recent weakness in Chinese LNG consumption, we believe China's long-term fundamentals remain strong, and the nation is on track to become the first 100 million ton LNG market before the end of the decade," he said.
Feygin added that China’s significant infrastructure investments and active role in the long-term LNG contracting market have “demonstrated the region’s commitment to natural gas as a long-term solution.”
Cheniere reported first quarter net income of $5.4 billion ($22.28/share), compared to a net loss of $865 million (minus $3.41) in the year-ago period.
