Singapore's Temasek Investing $468M in US LNG Venture

Temasek Holdings Pte. Ltd., Singapore's sovereign wealth fund and RRJ Capital will jointly invest about $468 million in liquid natural gas company (LNG) Cheniere Energy Incorporated (Nyseamex: LNG), as Singapore pursues its goal of becoming an Asian LNG hub.

Cheniere said Monday it plans to use the proceeds from Temasek and RRJ's investments with cash on hand to buy $500 million of the $2 billion of equity securities anticipated to be issued by Cheniere Energy Partners LP. The move will help finance the Sabine Pass LNG liquefaction project, which will cool natural gas into a liquid form so it can be shipped on specially designed tankers.

Cheniere will also work with Temasek and RRJ Capital to form a partnership focused on developing LNG sales, marketing and trading relationships and opportunities in Asian markets, according to a statement from the companies.

Temasek is a sovereign wealth fund of the Singaporean government with a portfolio of approximately $155 billion. The partnership between the companies will market LNG from the planned Sabine Pass and Corpus Christi, Texas, LNG liquefaction facilities.

This investment helps to expand our longer term interest in the energy and resources sector. We look forward to working with both Cheniere and RRJ Capital and others to tap into opportunities in Asia which are driven by the energy demand of growing middle income populations and continued urbanization in the decades ahead, Greg Lanham, Managing Director, Investments for Temasek said.

Temasek is the point of the spear in Singaporean LNG development. The government of Singapore has been working to make the island nation the major Asian LNG hub and is competing against Shanghai for that title.

I think part of that is the traders' community and also the buyers (of LNG) want to see the emergence of a second price market that would not be tied to the crude price, Leslie Palti-Guzman, lead LNG analyst for the Eurasia Group said Monday.

East Asian LNG contracts are priced to the Japan Crude Cocktail (JCC), and Singapore hopes to develop a second price market to compete with it. The move is being fueled by increased in demand for LNG in China and India, in addition to established markets like Japan and South Korea. Likewise, many emerging South East Asian economies are beginning to increase their consumption of LNG.

If the Singaporean LNG project reaches critical mass, there will be an impact on pricing, Palti-Guzman said. Singapore currently only has one long-term LNG import contract with BG Group (London: BG). Singapore is currently constructing an LNG terminal which is expected to begin operation in the second quarter of 2013.

BG Group currently has an exclusive contract with the Singaporean government to import and sell LNG. Its Singapore operations were originally focused on Australian LNG sources, but it has also begun hedging its portfolio with the expansion of LNG projects in North America, like the Sabine Pass liquefaction project. Ultimately, though, only two to three LNG projects are expected to receive Department of Energy approval in the U.S., which the majority of LNG development going to Canada instead to feed the burgeoning Japanese market.

Cheniere Energy Incorporated (Nyseamex: LNG) shares rose 45 cents, or 2.7 percent, to $16.91.