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BG Group Makes $8 Billion Pact with Cheniere to Export US LNG Overseas

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October 28, 2011

By Daniel Gilbert and Guy Chazan

HOUSTON — The U.S. moved a step closer to becoming a major exporter of natural gas Wednesday as British energy company BG Group PLC agreed to buy liquefied natural gas from a facility on the Gulf Coast to supply Asian and European markets.

The deal to buy the liquefied gas from Cheniere Energy Partners LP, the first of its kind in the U.S., calls for BG to pay Cheniere about $8.2 billion over 20 years.

It underscores how quickly the shale-gas boom has transformed the U.S. energy landscape, as surging domestic production is prompting companies that built facilities to import natural gas to reverse course and use them to export the resource instead.

The contract “is the first step towards the U.S. becoming a large-scale LNG exporter,” said Frank Harris, head of liquefied natural gas, or LNG, at energy consultancy Wood Mackenzie.

The deal is a coup for Houston-based Cheniere as it seeks contracts for its liquefied gas, which will be super-cooled for export in ocean-going tankers, before beginning construction of a $6 billion facility in Cameron Parish, La., next year. It expects to begin exporting the gas in 2015.

The move is also significant for BG, which will buy gas comparatively cheaply and sell it for much higher prices in Europe and Asia. “This gives us first mover advantage, and allows us to steal a march on our rivals,” BG spokesman Neil Burrows said.

Energy companies in the U.S., Canada and Australia are planning or have already begun building more than a dozen projects to liquefy and export natural gas as they seek to capitalize on growing demand for liquid-gas imports.

Asia is the hottest market: its demand for liquefied gas is expected to grow 68% between 2010 and 2020, according to advisory firm Poten & Partners.

BG, formerly one of the largest importers of LNG into the U.S., is now seeking permits to convert a facility in Lake Charles, La., to export gas. Freeport LNG Development LP has teamed with Macquarie Group to export LNG from a Texas facility.

In Canada, Apache Corp., Encana Corp. and EOG Resources Inc.earlier this month received approval from Canadian regulators to export LNG from a facility in British Columbia.

Also, last week Royal Dutch Shell PLC said it acquired a site in British Columbia to potentially export LNG.

Charif Souki, Cheniere’s chairman and chief executive, said he is confident that the “enormous market” for LNG will more than accommodate the new supply.

Mr. Souki said the company expects to strike a deal that will lock in most of the LNG capacity not yet under contract from its facility in the next few weeks.

(c) 2011 Dow Jones & Company, Inc.

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