Annual report pursuant to Section 13 and 15(d)

Property, Plant and Equipment

v2.4.0.6
Property, Plant and Equipment
 12 Months Ended
Dec. 31, 2011
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment Disclosure [Text Block]
PROPERTY, PLANT AND EQUIPMENT
 
Property, plant and equipment consists of LNG terminal costs and fixed assets, as follows (in thousands):
 
 
December 31,
 
 
2011
 
2010
LNG terminal costs
 
 
 
 
LNG terminal
 
$
1,637,724

 
$
1,629,427

LNG terminal construction-in-process
 
286

 
2,160

LNG site and related costs, net
 
163

 
170

Accumulated depreciation
 
(124,409
)
 
(81,781
)
Total LNG terminal costs, net
 
1,513,764

 
1,549,976

 
 
 
 
 
Fixed assets
 
 

 
 

Computer and office equipment
 
227

 
227

Vehicles
 
416

 
384

Machinery and equipment
 
1,068

 
964

Other
 
916

 
550

Accumulated depreciation
 
(1,975
)
 
(1,636
)
Total fixed assets, net
 
652

 
489

 
 
 
 
 
Property, plant and equipment, net
 
$
1,514,416

 
$
1,550,465

 
We began depreciating equipment and facilities associated with the initial 2.6 Bcf/d of sendout capacity and 10.1 Bcf of storage capacity of the Sabine Pass LNG terminal when they were ready for use in the third quarter of 2008. We began depreciating equipment and facilities associated with the remaining 1.4 Bcf/d of sendout capacity and 6.8 Bcf of storage capacity of the Sabine Pass LNG terminal when they were ready for use in the third quarter of 2009. Depreciation expense related to the Sabine Pass LNG terminal totaled $42.6 million, $41.8 million and $32.2 million for the years ended December 31, 2011, 2010 and 2009, respectively.
The Sabine Pass LNG terminal is depreciated using the straight-line depreciation method applied to groups of LNG terminal assets with varying useful lives. The identifiable components of the Sabine Pass LNG terminal with similar estimated useful lives have a depreciable range between 15 and 50 years, as follows:
Components
 
Useful life (yrs)
LNG storage tanks
 
50

Marine berth, electrical, facility and roads
 
35

Regasification processing equipment (recondensers, vaporization and vents)
 
30

Sendout pumps
 
20

Others
 
15-30

 
Our ARO assessment is based on the real property lease agreements for the Sabine Pass LNG terminal site.  At the expiration of the term of the leases, we are required to surrender the Sabine Pass LNG terminal in good working order and repair, with normal wear and tear and casualty expected. Sabine Pass LNG’s property lease agreements have a term of up to 90 years including renewal options. Due to the language in the real property lease agreements, we have determined that the cost to surrender the Sabine Pass LNG terminal in the required condition will be minimal, and therefore have not recorded an ARO associated with the Sabine Pass LNG terminal.