Cheniere's LNG Liquefaction Strategy: Pushing the Boundaries of the Project Finance Debt Market

Published 24 Jul 2017
Reference 6230
Region North America
Summary

After the collapse of world oil prices during the late 1990s, Cheniere began shifting its business focus away from upstream exploration and toward LNG regasification to take advantage of a projected decline in domestic natural gas production and the natural gas supply deficit that was expected in the US over the next decade. Thanks to fracking, precisely the reverse happened and Cheniere shifted from importing gas to gas export with the Sabine Pass LNG facility that came on line in 2016.

Teaching objectives

The case provides (i) an overview of the project finance debt market, a growing area of specialty finance; (ii) consideration of the decision making and risks associated with a long-lived project and various ways to mitigate risks using project finance; (iii) an introduction to the liquefied natural gas (LNG) market, a capital-intensive sector and major component of global project finance; (iv) a basic primer on credit and relative value analysis; (v) insight into how bank regulatory changes and other responses to the 2008-09 global financial crisis brought innovation and other unintended market consequences into the project finance arena; (vi) an understanding of the integration and interplay between various market segments, functions and participants.

Keywords
  • Global energy markets
  • Liquified natural gas (LNG)
  • Fracking
  • Gas liquification
  • Project finance
  • Risk management
  • Energy infrastructure
  • Corporate restructuring
  • Q41617