Bloomberg News

Cheniere’s Costs for Project Tied to Commodities, Chief Says

March 15, 2012

Cheniere Energy Inc. (LNG)’s cost to build a Louisiana gas export terminal won’t be affected by a U.S. regulator’s failure to approve the project today, the company’s chairman said after earlier warning of “significant price increases.”

Cheniere’s engineering and construction contract with a unit of Bechtel Group Inc. locked in prices until March 31, Charif Souki, also the chief executive officer, said today in a meeting at Bloomberg’s Washington office.

“I’m highly confident that there will not be any significant changes to the pricing as of now,” he said, citing costs for commodities such as nickel and steel.

Cheniere, which runs the largest U.S. liquefied gas import terminal in Cameron Parish, Louisiana, is seeking approval to build a $10 billion plant to export liquefied gas from the site. The Energy Department approved the Sabine Pass project, which may begin exporting by 2015 or 2016. The Federal Energy Regulatory Commission is reviewing the plans.

FERC’s failure to act at a monthly meeting today might cause “significant price increases” for engineering services and construction delays, Souki said in a March 7 letter to FERC Chairman Jon Wellinghoff, who hasn’t yet replied.

“If something were to happen where all of a sudden commodity prices started rising significantly, we would be at risk,” Souki said today. “The letter was sent to say ‘we don’t like to be at risk.’”

‘On The Schedule’

“Hopefully we’ll be on the schedule next month,” Souki said. He is seeking to arrange project financing by the end of March. FERC is “just making sure they’re doing it correctly from a procedural standpoint,” he said.

Natural gas for April delivery fell 0.5 cent to settle at $2.279 per million British thermal units today on the New York Mercantile Exchange. Futures are down 24 percent this year, and touched $2.204 on March 13, the lowest intraday price since Feb. 15, 2002.

Cheniere rose 21 cents, or 1.4 percent, to $15.71 at 4:15 p.m. in New York trading. The shares have climbed 81 percent so far this year.

Cheniere on March 14 said it would sell 21 million shares at $15.10 each, its fourth offering in less than a year to raise cash. Blackstone Group LP (BX) on Feb. 27 pledged $2 billion to help build the gas-export plant.

Cheniere has agreed to supply liquefied natural gas to London-based BG Group Plc; closely held Gas Natural Fenosa of Barcelona, Spain; GAIL India Ltd. (GAIL) of New Delhi; and Korea Gas Corp. (036460) of Gyeonggi, South Korea.

To contact the reporters on this story: Brian Wingfield in Washington at bwingfield3@bloomberg.net; Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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