Cheniere Energy Will Boom in the Long Run

Cheniere Energy (LNG) has significant infrastructure development in place that includes storage, marine and pipeline interconnection facilities. These developments together should allow Cheniere to source quality natural gas from United States pipeline network. The natural gas exporter has invested almost $30 billion to strengthen its infrastructure in the U.S. For example, Cheniere Energy is developing six natural gas liquefaction trains each with production capacity of 4.5 million tonnes per annum of LNG at Sabin Pass LNG terminals.

The important thing is that the constructions of Train first and second have been completed and it is currently engaged with the commissioning process for the first train.
The natural gas exporter expects the first cargo to be exported this month and for second train the upcoming months.

Improving development speeds

More importantly, the company is accelerating development of its other trains, which are expected to come online in the next couple of years. These developments should enhance its EBITDA margins and cash flows in the upcoming years. For instance, Cheniere Energy expects its Sabin Pass Liquefaction terminal to generate cash flow of $1.8 billion per year for its Train 1 to 5, while its trains 1 to 6 are expected to deliver approximately $2.3 billion of cash flow per year after completion.

Likewise, the natural gas exporter anticipates the Corpus Christi Liquefaction terminal to generate cash flow of $1.4 billion per annual after the completion of the projects. This terminal has total production capacity of approximately 31.5 million tonnes per annum. In reality, the company has around 87% of its LNG volume contracted for 20 years with the fixed fees that should keep its revenue intact going forward and create value for its shareholders eventually.

Strong growth prospects for Liquefied Natural Gas in the future

The demand for liquefied natural gas continues to grow. Cheniere Energy expects the demand for natural gas to rise approximately 193 million tonnes per annum by 2025. This means that the demand will grow at the compounded average growth rate of 6% during this period, necessitating an average of 23 mtpa of new liquefaction capacity per year. Hence, Cheniere Energy should benefit from this strong growth prospects for natural gas.

Meanwhile, its fellow competitors BP expects the natural gas demand to grow by 1.8% per annum. In fact it expects the natural gas demand to grow at higher clip than oil going forward. It forecasts the oil demand to grow at 0.9% per annum though 2035.

Conclusion

Cheniere Energy has picked up the pace with its development activities, most of which are nearing the completions that should soon become tailwind for the company and drive its growth. Moreover, the growing demand for natural gas seems to be never-ending with projected growth of 1.8% per year that should construct tremendous opportunity for Cheniere to speed up its top line performance.
Published on Mar 14, 2016
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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