This quarterly report contains certain statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, other than statements of historical fact, included herein or incorporated herein by reference are "forward-looking statements." Included among "forward-looking statements" are, among other things:

• statements relating to the construction and operation of each of our existing or proposed liquefied natural gas ("LNG") receiving terminals or our existing or proposed pipelines, or expansions or extensions thereof, including statements concerning the completion or expansion thereof by certain dates or at all, the costs related thereto and certain characteristics, including amounts of regasification and storage capacity, the number of storage tanks and docks, pipeline deliverability and the number of pipeline interconnections, if any;

• statements regarding future levels of domestic natural gas production, supply or consumption; future levels of LNG production or LNG imports into North America; sales of natural gas in North America; and the transportation, other infrastructure or prices related to natural gas, LNG or other energy sources or hydrocarbon products;

• statements regarding any financing transactions or arrangements, or ability to enter into such transactions or arrangements, whether on the part of Cheniere or any subsidiary or at the project level;

• statements regarding any terminal use agreement ("TUA") or other commercial arrangements presently contracted, optioned or marketed or potential arrangements to be performed substantially in the future, including any cash distributions and revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of LNG regasification capacity that are, or may become subject to, TUAs or other contracts;

• statements regarding counterparties to our TUAs, construction contracts and other contracts;

• statements regarding any business strategies, any business plans or any other plans, forecasts, projections or objectives, including potential revenues, capital expenditures, cost savings and strategic options, any or all of which are subject to change;

• statements regarding legislative, governmental, regulatory, administrative or other public body actions, requirements, permits, investigations, proceedings or decisions;

• statements regarding our anticipated LNG and natural gas marketing activities; and

• any other statements that relate to non-historical or future information.

These forward-looking statements are often identified by the use of terms and phrases such as "achieve," "anticipate," "believe," "estimate," "expect," "forecast," "plan," "potential," "project," "propose," "strategy" and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this quarterly report.

As used herein, the terms "Cheniere," "the Company," "we," "our" and "us" refer to Cheniere Energy, Inc. and its wholly-owned or controlled subsidiaries.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed under "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2008. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements are made as of the date of this quarterly report.

The following discussion and analysis presents management's view of our business, financial condition and overall performance and should be read in conjunction with our consolidated financial statements and the accompanying notes in Item 1. "Consolidated Financial Statements." This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future.

Overview

We are engaged primarily in the business of developing and constructing, and then owning and operating, a network of up to three onshore LNG receiving terminals and related natural gas pipelines. In addition, we are engaged in developing LNG and natural gas marketing activities, and also to a limited extent in oil and natural gas exploration and development activities in the Gulf of Mexico.

Organizational Structure

Although results are consolidated for financial reporting, we and Cheniere Energy Partners, L.P. ("Cheniere Partners") operate with independent capital structures. As such, cash flow available to us from Cheniere Partners is primarily in the form of cash distributions declared and paid to us on our limited and general partner interests and management fees. We received cash distributions and management fees from Cheniere Partners of $198.5 million in the nine months ended September 30, 2009 and $14.6 million for the same period of 2008. These cash distributions from Cheniere Partners were primarily used by Cheniere Marketing, LLC ("Cheniere Marketing"), our wholly owned subsidiary, to make its TUA payments to Sabine Pass LNG, L.P. ("Sabine Pass LNG") and to fund operations.

The following diagram depicts our ownership of Cheniere Partners, Sabine Pass LNG, Freeport LNG L.P., Creole Trail Pipeline, L.P. and Cheniere Marketing as of September 30, 2009:

[[Image Removed: Cheniere Energy, Inc. Organizational Chart]]

Overview of Significant 2009 Events

In the first nine months of 2009, we continued to execute our strategy to complete construction of the Sabine Pass LNG receiving terminal and to generate steady and reliable revenues under the long-term TUAs of Sabine Pass LNG. The major events for the first nine months of 2009 include the following:

• Sabine Pass LNG received capacity reservation fee payments from Cheniere Marketing, our wholly owned subsidiary, Total Gas & Power North America, Inc. (formally known as Total LNG USA, Inc.) ("Total") and Chevron U.S.A., Inc. ("Chevron");

• we began receiving limited partner distributions from Freeport LNG Development, L.P. ("Freeport LNG");

• Cheniere Marketing purchased, transported and successfully unloaded commercial LNG cargos into the Sabine Pass LNG receiving terminal;

• we reduced debt by exchanging $120.4 million aggregate principal amount of our 2¼% Convertible Senior Unsecured Notes due 2012 ("Convertible Senior Unsecured Notes") for a combination of $30.0 million cash and cash equivalents and 4.0 million shares of our common stock, reducing our principal amount due in 2012 to $204.6 million, at September 30, 2009; and

• we substantially completed construction and achieved full operability of our LNG receiving terminal with approximately 4.0 Bcf/d of total sendout capacity and five LNG storage tanks with approximately 16.9 Bcf of aggregate storage capacity.

 Liquidity and Capital Resources

                                                                                          Other
                                                                     Cheniere           Cheniere         Consolidated
                                            SabinePass LNG,      Energy Partners,        Energy,       Cheniere Energy,
(in thousands)                                   L.P.                  L.P.               Inc.               Inc.
Cash and cash equivalents                  $           -         $             -       $    87,354     $         87,354
Restricted cash and cash equivalents                 258,724                   210           7,231              266,165
Total                                      $         258,724     $             210     $    94,585     $        353,519

As of September 30, 2009, we had unrestricted cash and cash equivalents of $87.4 million. In addition, we had restricted cash and cash equivalents of $266.2 million, which were designated for the following purposes: $121.4 million for Sabine Pass LNG's working capital; $137.3 million for interest payments related to the Senior Notes described below; and $7.5 million for other restricted purposes.

We amended the 2008 Convertible Loans, as described below, which allowed us to transfer $65.2 million from the TUA reserve account early in order to utilize the funds for commercial opportunities.

We believe we have sufficient cash and other working capital to fund our operating expenses and other cash requirements until at least the earliest date when principal payments may be required on our existing indebtedness, which is August 2011. Our strategies to enhance near-term liquidity are focused on efforts to exploit the TUA capacity we have reserved through Cheniere Marketing at the Sabine Pass LNG receiving terminal. Our strategies to improve our capital structure and address maturities of our existing indebtedness may include entering into long-term TUAs or LNG purchase agreements that allow us to refinance debt, issuing equity or other securities, or selling assets.

LNG Receiving Terminal Business

Cheniere Partners

Our ownership interest in the Sabine Pass LNG receiving terminal is held through Cheniere Partners. In 2007, Cheniere Partners completed a public offering of 15,525,000 Cheniere Partners common units. As a result of this public offering, our combined general partner and limited partner ownership interests in Cheniere Partners was reduced to approximately 90.6%. Cheniere Partners owns a 100% interest in Sabine Pass LNG, which is operating the Sabine Pass LNG receiving terminal.

For each calendar year, Cheniere Partners is expected to make annual distributions of $1.70 per unit on all outstanding common units, subordinated units and general partner units. We anticipate receiving $18.5 million per year out of the total $44.9 million of annual common unit distributions. We anticipate receiving $235.8 million per year from distributions on the subordinated and general partner units, of which we own 100%.

Cheniere Partners relies on the receipt of operating revenues from Sabine Pass LNG's TUAs to fund quarterly cash distributions to us and other unitholders. Sabine Pass LNG is not permitted under the Sabine Pass Indenture to make cash distributions to Cheniere Partners if it does not satisfy a fixed charge coverage ratio test of 2:1, calculated as required in the Sabine Pass Indenture, as well as other conditions. If the coverage test is not met, we may not receive distributions. The fixed charge coverage ratio test was met for the periods through September 30, 2009 and distributions in the amount of $222.5 million have been made during the first nine months of 2009, from Sabine Pass LNG to Cheniere Partners. Cheniere Partners utilized the cash received from Sabine Pass LNG to pay expenses and make distributions. Cheniere Partners has made distributions of $210.5 million in the aggregate to us and its other unitholders during the first nine months of 2009.

A distribution reserve account was established from proceeds of Cheniere Partners' initial public offering to pay distributions to the common unitholders and general partner to the extent needed for Cheniere Partners to make such distributions with funds other than unrestricted cash through the distributions for the second quarter of 2009, after which the funds remaining in the account were returned to us. Sabine Pass LNG began making distributions from unrestricted cash in February 2009. In August 2009, $34.9 million of remaining funds in the distribution reserve account were distributed by Cheniere Partners to us pursuant to the terms of the Cheniere Partner's partnership agreement. These distributed funds were included as unrestricted cash and cash equivalents on the September 30, 2009 Consolidated Balance Sheet.

We also expect to receive approximately $19 million of annual management and service fees from Sabine Pass LNG and Cheniere Partners pursuant to existing agreements.

Sabine Pass LNG Receiving Terminal

Construction at the Sabine Pass LNG receiving terminal was substantially completed in the third quarter of 2009. Our estimated aggregate construction, commissioning and operating cost budget through the achievement of full operability of the Sabine Pass LNG receiving terminal (with approximately 4.0 Bcf/d of total sendout capacity and five LNG storage tanks with approximately
16.9 Bcf of aggregate storage capacity) was approximately $1,559 million, excluding financing costs. As of September 30, 2009, we had substantially completed construction and attained full operability of our LNG receiving terminal, and such was accomplished within our budget.

The entire approximately 4.0 Bcf/d of regasification capacity at the Sabine Pass LNG receiving terminal has been fully reserved under three long-term TUAs, under which Sabine Pass LNG's customers are required to pay fixed monthly fees, whether or not they use the terminal. Capacity reservation fee TUA payments will be made by our third-party customers as follows:

• Total Gas and Power North America, Inc. (formerly known as Total LNG USA, Inc.) ("Total") has reserved approximately 1.0 Bcf/d of regasification capacity and has agreed to make monthly capacity payments to Sabine Pass LNG aggregating approximately $125 million per year for 20 years that commenced April 1, 2009. Total, S.A. has guaranteed Total's obligations under its TUA up to $2.5 billion, subject to certain exceptions; and

• Chevron U.S.A., Inc. ("Chevron") has reserved approximately 1.0 Bcf/d of regasification capacity and has agreed to make monthly capacity payments to Sabine Pass LNG aggregating approximately $125 million per year for 20 years that commenced July 1, 2009. Chevron Corporation has guaranteed Chevron's obligations under its TUA up to 80% of the fees payable by Chevron.

Our wholly-owned subsidiary, Cheniere Marketing, has reserved the remaining 2.0 Bcf/d of regasification capacity, and is entitled to use any capacity not utilized by Total and Chevron. Cheniere Marketing has agreed to make capacity payments aggregating approximately $250 million per year for the period from January 2009 through at least the third quarter of 2028. Cheniere has guaranteed Cheniere Marketing's obligations under its TUA. Under each of these TUAs, Sabine Pass LNG is entitled to retain 2% of the LNG delivered for the customer's account, which Sabine Pass LNG will use primarily as fuel for revaporization and self-generated power at the Sabine Pass LNG receiving terminal.

Each of Total and Chevron previously paid us $20.0 million in nonrefundable advance capacity reservation fees, which are being amortized over a 10-year period as a reduction of each customer's regasification capacity fees payable under its TUA.

Other LNG Receiving Terminals

We have a 30% limited partner interest in Freeport LNG. In the first nine months of 2009, Freeport LNG made aggregate distributions to us of $9.0 million. We expect to continue to receive distributions from Freeport LNG as they are approved by the board of directors of Freeport LNG's general partner.

We will contemplate making final investment decisions to complete construction of our Corpus Christi LNG receiving terminal project and to commence construction of our Creole Trail LNG receiving terminal project upon, among other things, entering into acceptable commercial arrangements and entering into acceptable financing arrangements for the applicable project. We do not expect to spend significant funds on these projects until we have entered into acceptable commercial arrangements and acceptable financing arrangements.

Natural Gas Pipeline Business

As of September 30, 2009, Phase 1 of the Creole Trail Pipeline, consisting of 94 miles of natural gas pipeline, had been constructed and placed into commercial operations. Expenditures incurred for the construction of the Creole Trail Pipeline through September 30, 2009 were approximately $550 million, including accrued liabilities. As discussed above, we believe we have sufficient cash and other working capital to operate Phase 1 of our Creole Trail Pipeline until at least the earliest date when principal payments may be required on our existing indebtedness, which is August 2011.

We will contemplate making a final investment decision to construct Phase 2 of the Creole Trail Pipeline, the Corpus Christi Pipeline, the Cheniere Southern Trail Pipeline and the Burgos Hub Project upon, among other things, receiving all required authorizations to construct and operate the applicable pipeline (and storage facility in the case of Burgos Hub), to the extent not already obtained, and entering into acceptable commercial arrangements and acceptable financing arrangements for the applicable project. We do not expect to spend significant funds on these projects until we have entered into acceptable commercial arrangements and acceptable financing arrangements.

LNG and Natural Gas Marketing Business

During the nine months ended September 30, 2009, Cheniere Marketing successfully purchased, transported, and unloaded LNG at the Sabine Pass LNG receiving terminal on a spot basis and entered into derivative contracts to hedge the cash flows from the future sales of this LNG inventory.

The accounting treatment for LNG inventory differs from the treatment for derivative positions such that the economics of Cheniere Marketing's activities are not transparent in the financial statements until all LNG inventory is sold and derivative positions are settled. Our LNG inventory is recorded as an asset at cost and is subject to lower of cost or market ("LCM") adjustments at the end of each period. The LCM adjustment market price is based on month-end natural gas spot prices, and any loss from a LCM adjustment is recorded in our earnings at the end of each period. Revenue and cost of goods sold are not recognized in our earnings until the regasified LNG is sold. Our unrealized derivatives positions at the end of each period extend into the future to hedge the cash flow from future sales of our LNG inventory. These positions are measured at fair value and we record the gains and losses from the change in their fair value currently in earnings. Thus, earnings from changes in the fair value of our derivatives may not be offset by losses from LCM adjustments to our LNG inventory because the LCM adjustments that may be made to LNG inventory are based on period-end spot prices that are different from the time periods of the prices used to fair value our derivatives. Any losses from changes in the fair value of our derivatives will not be offset by gains until the regasified LNG is actually sold.

For the nine months ended September 30, 2009, Cheniere Marketing had a $17.0 million loss as a result of LCM adjustments to its LNG inventory. This loss was offset by $6.9 million in gains from regasified LNG sales, derivative settlements, and changes in fair value of our derivatives. The reasons for the LCM losses being greater than the sales and derivative earnings are that the prompt month prices used to adjust LNG inventory value declined more than the derivative contract month prices used to determine fair value of the derivatives; in addition, Cheniere Marketing did not sell the majority of its LNG inventory as of September 30, 2009.

As discussed above, we believe we have sufficient cash and other working capital to fund our LNG and natural gas marketing business until at least the earliest date when principal payments may be required on our existing indebtedness, which is August 2011.

Corporate and Other Activities

We are required to maintain corporate general and administrative functions to serve our business activities described above. As discussed above, we believe that we will have sufficient cash and cash equivalents to fund these functions until our debt maturities.

Although our focus is primarily on the development of LNG-related businesses, we continue to be involved to a limited extent in oil and gas exploration, development and exploration activities in the shallow waters of the Gulf of Mexico. We do not anticipate significant cash expenditures related to these activities and expect our cash inflows from oil and natural gas production to decrease as reserves are produced.

Sources and Uses of Cash

The following table (in thousands) and the explanatory paragraphs following the
table summarize the sources and uses of our cash and cash equivalents for the
nine months ended September 30, 2009 and 2008. The table presents capital
expenditures on a cash basis; therefore, these amounts differ from the amounts
of capital expenditures, including accruals, which are referred to elsewhere in
this document.

                                                                     Nine Months Ended
                                                                       September 30,
                                                                  2009             2008
                                                                               (As adjusted)
SOURCES OF CASH AND CASH EQUIVALENTS
Use of restricted cash and cash equivalents                    $  219,727     $       391,399
Use of restricted treasury securities                                  -               12,673
Proceeds from debt                                                     -              239,965
Proceeds from related party debt                                       -              250,000
Distributions from limited partnership investment                   9,000               4,800
Sale of common stock                                                   -                  471
  Total sources of cash and cash equivalents                      228,727             899,308

USES OF CASH AND CASH EQUIVALENTS
LNG terminal and pipeline construction-in-process                 (97,991 )          (521,687 )
Debt repurchases                                                  (30,030 )              -
Operating cash flow                                               (94,226 )          (101,412 )
Distributions to non-controlling interest holders                 (19,794 )           (19,794 )
Purchases of intangible and fixed assets, net of sales               (760 )            (2,765 )
Debt issuance costs                                                  (121 )           (28,148 )
Purchase of treasury shares                                           (80 )            (4,405 )
Purchase of LNG for commissioning, net of amounts
transferred to LNG terminal construction-in-process                    -              (16,595 )
Advances under long-term contracts, net of transfers to
construction-in-process                                                -               (6,587 )
Investment in restricted cash and cash equivalents                     -             (255,586 )
Repayment of debt                                                      -              (95,000 )
Other                                                                (563 )           (15,522 )
  Total uses of cash and cash equivalents                        (243,565 )        (1,067,501 )
NET DECREASE IN CASH AND CASH EQUIVALENTS                         (14,838 )          (168,193 )
CASH AND CASH EQUIVALENTS-beginning of period                     102,192             296,530
CASH AND CASH EQUIVALENTS-end of period                        $   87,354     $       128,337

Use of restricted cash and cash equivalents

In November 2006, Sabine Pass LNG issued an aggregate principal amount of $2,032.0 million of Senior Secured Notes consisting of $550.0 million of 7¼% Senior Secured Notes due 2013 (the "2013 Notes") and $1,482.0 million of 7½% Senior Secured Notes due 2016 (the "2016 Notes" and collectively with the 2013 Notes, the "Senior Notes"). In September 2008, Sabine Pass LNG issued an additional $183.5 million, before discount, of 2016 Notes whose terms were identical to the previously outstanding 2016 Notes. The net proceeds from the additional issuance of the 2016 Notes were $145.0 million. Under the indenture governing the Senior Notes, a portion of the proceeds from the Senior Notes is required to be used for scheduled interest payments and to fund the cost to complete construction of the Sabine Pass LNG receiving terminal. Due to these restrictions imposed by the indenture, the proceeds are not presented as cash and cash equivalents, and therefore, when proceeds from the Senior Notes are used they are presented as a source of cash and cash equivalents. For the nine months ended September 30, 2009, the $219.7 million use of restricted cash and cash equivalents was the result of obtaining access to use the restricted cash and cash equivalents in the TUA reserve account and using restricted cash and cash equivalents to pay for scheduled interest payments and construction activities at the Sabine Pass LNG receiving terminal. For the nine months ended September 30, 2008, the $391.4 million of restricted cash and cash equivalents were used primarily to pay for scheduled interest payments and construction activities at the Sabine Pass LNG receiving terminal.

LNG terminal and pipeline construction-in-process

Capital expenditures for our LNG receiving terminals and pipeline projects were $98.0 million and $521.7 million in the nine months ended September 30, 2009 and 2008, respectively. The decrease in LNG terminal and pipeline construction-in-process in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, resulted primarily from our completing construction of the Sabine Pass LNG receiving terminal, which commenced construction in the first quarter of 2005, and the initial phase of the Creole Trail Pipeline, which commenced construction in the second quarter of 2007.

Debt repurchases

Net cash used in debt repurchase was $30.0 million and zero in the nine months ended September 30, 2009 and 2008, respectively. During the second quarter of 2009, we reduced long-term debt by exchanging a combination of $30.0 million cash and cash equivalents and 4.0 million common shares for $120.4 million aggregate principal amount of our Convertible Senior Unsecured Notes.

Operating cash flow

Net cash used in operations was $94.2 million and $101.4 million in the nine months ended September 30, 2009 and 2008, respectively. Net cash used in operations in the nine months ended September 30, 2009 and 2008 related primarily to the continued development of our LNG receiving terminals, natural gas pipelines and LNG and natural gas marketing business, offset by TUA payments received from Total and Chevron during the nine months ended September 30, 2009. Net cash used in operating cash flow for the nine-month period ended September 30, 2009 included $34.3 million used for LNG inventory compared to zero in the corresponding period of 2008.

Distributions to non-controlling interest holders

. . .