Commitments and Contingencies |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies |
COMMITMENTS AND CONTINGENCIES
We have various contractual obligations which are recorded as liabilities in our Consolidated Financial Statements. Other items, such as certain purchase commitments and other executed contracts which do not meet the definition of a liability as of December 31, 2016, are not recognized as liabilities but require disclosures in our Consolidated Financial Statements.
LNG Terminal Commitments and Contingencies
Obligations under EPC Contracts
SPL has entered into lump sum turnkey contracts with Bechtel for the engineering, procurement and construction of Trains 3 through 5 of the Liquefaction Project.
The EPC contract for Trains 3 and 4 and the EPC contract for Train 5 provide that SPL will pay Bechtel contract prices of $3.9 billion and $3.0 billion, respectively, subject to adjustment by change order. SPL has the right to terminate each EPC contract for its convenience, in which case Bechtel will be paid (1) the portion of the contract price for the work performed, (2) costs reasonably incurred by Bechtel on account of such termination and demobilization, and (3) a lump sum of up to $30.0 million depending on the termination date.
Obligations under SPAs
SPL has entered into third-party SPAs which obligate SPL to purchase and liquefy sufficient quantities of natural gas to deliver 401.5 million MMBtu per year of LNG to the customers’ vessels for Trains 1 and 2 of the Liquefaction Project and 628.5 million MMBtu per year of LNG for Trains 3 through 5 of the Liquefaction Project, subject to completion of construction.
Obligations under LNG TUAs
SPLNG has entered into third-party TUAs with Total Gas & Power North America, Inc. and Chevron U.S.A. Inc. to provide berthing for LNG vessels and for the unloading, storage and regasification of LNG at the Sabine Pass LNG terminal.
Obligations under Natural Gas Supply, Transportation and Storage Service Agreements
SPL has entered into index-based physical natural gas supply contracts to secure natural gas feedstock for the Liquefaction Project. The terms of these contracts primarily range from approximately one to six years and commence upon the occurrence of conditions precedent, including SPL’s declaration to the respective natural gas supplier that it is ready to commence the term of the supply arrangement in anticipation of the date of first commercial operation of the applicable, specified Trains of the Liquefaction Project. As of December 31, 2016, SPL has secured up to approximately 1,993.9 MMBtu of natural gas feedstock through natural gas supply contracts, of which we determined that we have purchase obligations for the contracts for which conditions precedent were met.
Additionally, SPL has entered into transportation and storage service agreements for the Liquefaction Project. The initial term of the transportation agreements ranges from 10 to 20 years, with renewal options for certain contracts, and commences upon the occurrence of conditions precedent. The term of the SPL storage service agreements ranges from three to ten years.
As of December 31, 2016, SPL’s obligations under natural gas supply, transportation and storage service agreements for contracts in which conditions precedent were met were as follows (in thousands):
Services Agreements
We have entered into certain services agreements with affiliates. See Note 12—Related Party Transactions for information regarding such agreements.
Restricted Net Assets
At December 31, 2016, our restricted net assets of consolidated subsidiaries were approximately $2.6 billion.
Other Commitments
State Tax Sharing Agreements
SPLNG, SPL and CTPL have entered into state tax sharing agreements with Cheniere. See Note 12—Related Party Transactions for information regarding such agreements.
Other Agreements
In the ordinary course of business, we have entered into certain multi-year licensing and service agreements, none of which are considered material to our financial position. Additionally, we have various lease commitments, as disclosed in Note 13—Leases.
Legal Proceedings
We may in the future be involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. In the opinion of management, as of December 31, 2016, there were no pending legal matters that would reasonably be expected to have a material impact on our operating results, financial position or cash flows.
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