NEW YORK - BG Group will export liquefied natural gas from the United States under a landmark $8 billion deal with Cheniere Energy that will allow domestic producers to ship bountiful shale gas supplies to the world for the first time.
The deal, announced Oct. 26, paves the way for terminal developer Cheniere to secure financing for the its Sabine Pass project in Louisiana which could be the first LNG export plant built in the United States in nearly 50 years as U.S. gas production hits record highs.
"If we start construction by next year then we could be exporting by 2015," Cheniere chief executive Charif Souki told Reuters. "The BG Group contract will help with financing."
The deal is expected to reap $410 million a year, Souki said, a boon for a company which put most of its money into building a huge import terminal at Sabine Pass that has for three years received only sporadic supply.
Record U.S. natural gas production has swamped the market in recent years, leading to a series of rival export proposals all hoping to sell LNG to higher paying markets in Asia and Europe.
Under the deal, which could help reverse the fortunes of the troubled Houston-based company, Cheniere will sell 3.5 million tons per year of liquefied natural gas to BG for 20 years from its proposed export plant in Sabine Pass, La.
Terminal developers like Cheniere are scrambling to turn their idle import facilities into export plants to ship U.S. natural gas abroad after a revolution in shale gas production left the United States with 100 years of supply.
BG Group, one of the world's biggest LNG players, has access to import markets across the globe. Anywhere from Japan to Korea to Chile could soon be importing U.S. gas.
Cheniere will sell the LNG to BG for 115 percent of U.S. benchmark Henry Hub prices, plus a $2.25 premium.
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