October 19, 2010 / 5:28 PM / 9 years ago

UPDATE 1-LNG tanker heads from U.S. Sabine Pass to China Sea

* Two US re-export deals expected this week

* U.S. gas prices way below those in Europe and Asia

By Edward McAllister

NEW YORK, Oct 19 (Reuters) - Cheniere Energy’s (LNG.A) Sabine Pass liquefied natural gas terminal in Louisiana sent a cargo of LNG to Asia on Tuesday, the first of two U.S. re-export deals this week as shippers try to make the most of higher gas prices overseas.

The Exquisite liquefied natural gas tanker, part of Excelerate Energy’s shipping fleet, left Sabine Pass terminal on Tuesday bound for the China Sea, according to AISLive ship tracker on Reuters.

The tanker was expected to arrive in the China Sea on Dec. 27, the data showed, with potential importers in China, Taiwan, Korea or Japan.

This is the latest in a string of re-export deals from the U.S. where gas prices continue to fall under the weight of ample domestic supply, weak demand and swelling inventories.

Before this week, about 10 bcf of LNG had been re-exported from the United States this year, whereas imports have dipped to minimal contracted lows, leaving most terminals sitting idle.

Re-export allows customers to import LNG, store it at the terminal and re-export later to higher paying markets in Europe, Asia or South America where LNG demand has rebounded since last year, buoying prices.

On Tuesday, U.S. gas prices at $3.50 per million British thermal units were nearly $4 below British gas prices — a benchmark for spot LNG deals in the Atlantic — and about $6 below spot LNG prices in Asia. [LNG/] The spread makes it potentially profitable for traders to send cargoes from the United States to Asia, even after shipping costs.

The Exquisite tanker will be followed by the Excelerate tanker, also an Excelerate Energy vessel, which is currently loading at the Freeport LNG terminal in Texas and is expected to leave on Wednesday. Freeport declined to comment on the destination of the cargo. [ID:nN18265574]

ConocoPhillips (COP.N) and Dow Chemical (DOW.N) own import capacity at Freeport, though until now only Conoco has re-exported cargoes. Last month it sold a cargo to Citi Group (C.N) for delivery in the Excalibur tanker to Japan.

Only Freeport and Cheniere Energy’s (LNG.A) Sabine Pass import terminal in Louisiana have re-export capacity, though Sempra Energy’s (SRE.N) Cameron terminal, also in Louisiana, has applied for a license.

Meanwhile, Sabine Pass is expected to receive a cargo of LNG on Tuesday, a Chevron (CVX.N) spokesman said. The tanker is being delivered to Chevron by Qatari LNG producer Rasgas. Chevron declined to comment on the name of the tanker, but the Al Dafna tanker from Qatar, which can hold up to 266,000 cubic meters of LNG, was last seen heading towards the Gulf of Mexico before going off the radar last week.

Chevron has also applied for a re-export license from Sabine Pass with the Department of Energy, but this is yet to be approved.

Editing by Sofina Mirza-Reid

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