CERAWEEK: Cheniere selling spot LNG volumes at TTF discounts that vary by day

Cheniere Energy has around 5 million mt of LNG volumes currently available beyond its normal marketing supply to offer for prompt delivery, as Europe faces enormous pressure over security of supply, executives said March 9.

The volumes are available because of the early startup of Train 6 at its Sabine Pass Liquefaction facility in Louisiana and Train 3 at its Corpus Christi Liquefaction facility in Texas, executives told a small group of reporters at the CERAWeek by S&P Global energy conference in Houston. Long-term contracts tied to Sabine Pass Train 6 start kicking in in 2023, Cheniere said.

"Our business model has never shown through like it has during these times," CEO Jack Fusco said.

Discounts to the front-month Dutch TTF gas hub price on cargoes offered by Cheniere vary by day; they have lately been capped at around 5%-10%, said Corey Grindal, Cheniere's executive vice president of worldwide trading. Except for the Netherlands, all regas slots in Europe are full. To land there, Cheniere has to offer a discount to the gas hub that meets what buyers are willing to pay, Grindal said.

"It's volatile, and those discounts go up or down based on that volatility," Grindal said. "When we sell it, we know what slot. We agree upon the delivery window. We agree upon the discount when we sell them the cargo."

Some of the currently available volumes are offered under short-duration term periods, while other volumes are sold spot, Grindal said. Cheniere has traditionally kept some cargoes back for marketing when fog or hurricanes disrupt production.

"To the extent we don't have Mother Nature interrupting some of our cargoes, we have spot cargoes all the time," Grindal said. "We manage them very tight to the chest."

Cheniere does some hedging, though for the most part it tries to sell cargoes when it has clarity of when the LNG is going to be produced. From there, it seeks the highest price in the market it can get, executives said.

Cheniere already viewed the European energy system as one that would require more gas imports and that without them, governmental energy and environmental policies were headed in an unsustainable direction, executives said. The energy crisis currently unfolding has exacerbated those tensions as ultra-high European gas prices draw global LNG volumes to the continent.

US LNG exporters like Cheniere are watching to see if European policymakers will respond in a way that encourages development of domestic import infrastructure and dealmaking with LNG exporters abroad to supply them.

"If these economics are sustained, clearly it will shift trade patterns and capital investment going forward," Anatol Feygin, Cheniere's chief commercial officer, told reporters. "We are worried about demand destruction. We are worried about how the market allocates this scarce resource. And we are doing everything we can to respond to that."