Who will buy the first LNG cargo from the US’ 25mn t/yr Sabine Pass project? Trading desks across London are taking bets, we hear.
There will certainly be much fanfare, as Sabine Pass will be the first new US LNG export project since the 1.5mn t/yr Kenai plant started in the 1960s.
Sabine Pass project developer Cheniere Energy is certainly not saying. Even at IP Week last week, the company reconfirmed that the first Sabine Pass export would be in late February or early March, but then refused to answer questions from the press.
So I did some calculations and came up with this.
On a netback basis, it turns out that Brazil is the most profitable market to which to send the first US cargo from Sabine Pass. Netbacks are calculated using the final-destination gas or LNG price, minus transport costs.
This compares potential spot LNG buyers from Japan, India, Brazil, the Middle East, the UK, France, and Spain.
A delivery to Brazil would be the most profitable, with an average highest netback of $4.56/mn Btu, using data since the start of February.
But the cargo could also go to Spain, which has more storage capacity to accept supply at short notice and lots of idled gas-fired power plants, which have been shut following a surge in renewable generation capacity in the country and lower power demand owing to a weaker economy.
Commissioning cargoes from new projects are usually sold on a spot basis owing to uncertainty over loading dates and gas specifications. Brazil only has three floating storage and regasification units, which have limited storage capacity and may not be able to accept a cargo at short notice.
But Spain has six onshore import terminals with enough storage for up to 19 cargoes, compared with Brazil’s capacity to absorb three cargoes.
The netback to Spain’s AOC gas hub averages around $4.10/mn Btu, assuming $0.50/mn Btu for regasification, the second-highest netback value.
Cheniere has signed a deal with French state-controlled utility EdF to deliver up to 26 cargoes from Sabine Pass to France’s 9.4mn t/yr Dunkirk terminal on a delivered basis by the end of 2018. But Dunkirk is yet to start up and is not importing LNG yet.
Cheniere has also previously said that it expected half of all US LNG to go to Europe.
So where will the first Sabine Pass LNG cargo go? Place your bets now…