Cheniere utilization at Sabine Pass remains reduced amid persistent fog

Houston — Cheniere Energy's Sabine Pass terminal continued to see reduced utilization Wednesday amid fog that is expected to hinder for another week vessel traffic along the channel that serves the biggest liquefaction facility in the US.

Trade flow restrictions due to the deepening crisis created by the coronavirus outbreak have put further pressure on an LNG market that was already suffering from weaker than expected demand in Asia and low international prices.

So far, there isn't any evidence publicly that the sustained drop in feedgas flows to Sabine Pass in Louisiana is due to market factors such as pricing or cancellations. Cheniere disclosed last month two cancellations for April loading – one from Sabine Pass and the other from its terminal near Corpus Christi, Texas. Its customers generally have until March 20 to notify it of any changes in their intentions for May. The company has not commented on whether it is conducting any maintenance or plans to move up scheduled work.

The collapse in crude oil prices could have driven fuel substitution under normal market conditions. However, considering LNG prices already trending at all-time lows, it appears unlikely that a lower oil price, even in the $20-$30/bbl range, would do much to push US LNG out of the market, according to S&P Global Platts Analytics. Oil-indexed contracts continue to make up the majority of global LNG supply.

Gas deliveries to Sabine Pass totaled approximately 3.3 Bcf/d on Wednesday, in line with levels seen over the last 10 days but approximately 1 Bcf/d below levels recorded over the previous 10 days, Platts Analytics data show. Total US feedgas flows of approximately 8.4 Bcf/d on Wednesday were down from a record 9.6 Bcf/d on January 31, largely due to the drop in deliveries to Sabine Pass.

Pilot service along the intracoastal waterway that serves Sabine Pass was suspended Tuesday due to fog and remained suspended Wednesday morning, according to a notice to vessels in the area. As of the notice, there were 15 vessels waiting to start in and 14 vessels waiting to sail. A weather forecast attached to the notice said fog was expected to be a factor through March 17.

A Cheniere spokesman did not immediately respond to a message Wednesday seeking comment.

On a February 25 investor call, Cheniere's chief commercial officer, Anatol Feygin, said that in general "some LNG on the margin may not be lifted from the US this year" due to market factors, though the company did not expect that to develop into a long-term trend.

Cheniere's long-term contracts are take-or-pay, so it would receive a fee whether cargoes are lifted or not. Declaration of force majeure events, however, could allow customers to avoid having to comply with contract terms.

During an interview with Platts last week, Feygin said Cheniere's position is that end-market conditions in and of themselves are not a cause for force majeure.