Activity around Cheniere Energy’s liquid natural gas terminal in Cameron Parish should pick up once the company completes construction on a $6.5 billion project to allow the Sabine Pass facility to export natural gas.
The energy company based in Houston said Tuesday that the previously announced project to liquefy cheap U.S. natural gas in preparation for export will mean hiring about 148 additional employees, with salaries and benefits hovering around $100,000 a year. The terminal now employs 77 workers.
The new jobs would support another 589 indirect jobs in the Lake Charles area, and 3,000 construction jobs are projected at the peak of construction, the state’s economic development department said in a statement.
Cheniere Energy received approval from the U.S. Department of Energy in May to export natural gas, and is in the process of gaining approval from the Federal Energy Regulatory Commission to clear the way for building out the natural gas liquefaction capability.
Exporting natural gas out of Louisiana has become an economic no-brainer given the massive quantities of natural gas being produced by the Haynesville Shale natural gas discovery in northwest Louisiana.
“It is a natural thing for them do,” said Don Briggs, president of the Louisiana Oil and Gas Association. “And with the abundance of natural gas … I mean they’re obviously locking up some good long-term contracts for supply. I mean they’re not going to go spend $6 billion without some pretty solid contracts,” he said.
“It’s a good thing for them and it’s a good thing for the state,” he added.
Cheniere previously reported an agreement to sell liquefied natural gas from its Sabine Pass facility to Gas Natural Fenosa, the largest gas and power company in Spain and Latin America.
Charif Souki, Cheniere Energy’s chairman and CEO, pointed to the Haynesville Shale natural gas discovery as a game-changer for the state and Gulf South.
“The construction of Cheniere’s liquefaction project in Cameron Parish will provide key support to Louisiana’s economy and natural gas industry, which has been transformed by the development of the Haynesville Shale,” Souki, said in a statement. “In only two years, Louisiana’s natural gas production has doubled as the Haynesville has grown into one of the most prolific shale plays in the world.”
“Beyond the direct investment and job creation that will come with the expansion, an LNG export facility here in Louisiana means new markets and new consumers for domestically produced natural gas — and that will in turn bring new exploration opportunities and jobs in the energy industry, in drilling and support industries, from north Louisiana to south Louisiana, both onshore and offshore,” Scott Angelle, secretary of the state’s Department of Natural Resources, said in a statement.
Cheniere Energy’s current facility at Sabine Pass is designed to offload liquefied natural gas imports and convert it back to a gaseous state. This facility and others across the Gulf South came online several years ago when natural gas prices shot up and there were threats of shortages.
“They saw a need here, and said, ‘Let’s build for that need,’ ” recalled Loren Scott, a retired LSU economist who closely follows the state’s oil and gas industry.
“And it looked like a really smart thing, but then suddenly this breakthrough in fracking just turned everything on its head,” Scott explained, referring to relatively new — and environmentally controversial — technology where water and other chemicals are injected into the earth to help free up natural gas.
Now, with U.S. natural gas prices hovering around $4 per thousand cubic feet, it makes plenty of sense to export to places like Europe and Asia, Scott said. However, a liquefaction facility that converts the gas into a liquid for export by tanker ships is hugely capital intensive, he added.
“Only now you have to find $6 billion,” Scott said. “And your alternative, of course, is to abandon what you have.”
Cheniere Energy’s Sabine Pass Terminal, designed to receive imports, has not seen as much activity as many had hoped. In fact, in August 2008 Cheniere Energy secured $250 million in financing to carry the company through the next three years.
“And who would have thunk that we wouldn’t have needed this,” Scott remarked of the nearly idled LNG import terminals. “Because we were all talking about shortages a few years ago, and now we’re talking about a surplus. And so, you’ve either got to simply abandon the project altogether or find the capital to re-export the stuff.”
Cheniere Energy anticipates construction will begin in early 2012, with hiring of the new permanent jobs beginning in 2014. The company will begin operations at the liquefaction facility in 2015, and the second phase of the project is expected to be completed by the end of 2018. Adding liquefaction capabilities will transform the Sabine Pass terminal into a bi-directional facility capable of exporting LNG in addition to receiving LNG for regasification.
The project will use three of the state’s economic development incentive programs: Louisiana FastStart, a job training program; Quality Jobs program, which allows for salary rebates or investment tax credits if Cheniere Energy meets specific job creation goals, and the Industrial Tax Exemption program, which provides a 100 percent property tax abatement for up to 10 years on the project’s capital investment.
“Cheniere Energy’s construction of one of the country’s first liquefaction facilities at the Sabine Pass terminal in Cameron Parish is a huge win for our state,” and will be one of the largest capital investments in the state’s history, Gov. Bobby Jindal said in a statement. “Cheniere’s facility will grow our economy, increase natural gas production and become a major exchange in continuing to meet the demand for energy around the world,” he said.