OREANDA-NEWS. March 29, 2017. The prices Cheniere Energy is reporting to US regulators for long-term LNG contract sales do not include liquefaction charges, meaning they may not accurately reflect the market.

Under the long-term contracts customers pay liquefaction fees whether they take LNG or not, Houston-based Cheniere told Argus. So the company doesn't consider the fees part of the cost of the LNG and only reports the 115pc of the final prompt Nymex Henry Hub settlement price for a month in which a cargo is scheduled that customers pay.

This disparity between what companies actually pay and what Cheniere reports can add up to about $7mn for a typical cargo.

Sabine Pass exported 56 cargoes last year, its first year of operation, with a combined volume equivalent to 184 Bcf (5.21bn m?) of gas. The facility exported a monthly record of 15 cargoes in January, as the third liquefaction train ramped up production.

The US Department of Energy (DOE) requires that LNG exporters report free-on-board (FOB) sales prices on a monthly basis that are publicly disclosed. The agency allows holders of export licenses to determine the prices.

Since November, when a 20-year take-or-pay deal with Shell started, Cheniere has reported to the DOE that it sold a number of cargoes at FOB prices that were 115pc of the final Nymex price for the month they were scheduled.

Cheniere reported to the DOE that in November it sold four cargoes from its Sabine Pass terminal in Louisiana at $3.18/mmBtu, seven December cargoes at $3.72/mmBtu, and five January cargoes at $4.52/mmBtu. All of those cargoes were sold to Shell, and the FOB prices were equivalent to the 115pc of the final Nymex for the respective month.

With the $2.25/mmBtu liquefaction fees included the November cargoes would have been sold at $5.43/mmBtu each, the December cargoes at $5.97/mmBtu and the January cargoes at $6.77/mmBtu.

Cheniere said liquefaction fees will be excluded from DOE price reporting once 20-year contracts start for respective customers. So far, only Shell's gas contract has begun. By next year, after other contracts start, most of the reported prices could just be 115pc of the Nymex price.

Argus assessed the prompt-month spot US Gulf coast price for November and December loading each at an average of $5.99/mmBtu. The January price was assessed at an average of $7.30/mmBtu.

In some cases the liquefaction fees were included in the price, however. This includes five out of six cargoes loaded at Sabine Pass in January onto ships chartered by Cheniere. Cheniere subsidiary Cheniere Marketing pays its parent company a $3/mmBtu liquefaction charge for LNG that it delivers on its ships. That liquefaction charge is included in the reported price to the DOE because Cheniere Marketing is not obligated to pay a liquefaction fee if it does not take a cargo.