Edgar Filing: CHENIERE ENERGY INC

SCHEDULE 14A INFORMATION
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Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

[X] Filed by the Registrant
[_] Filed by a Party other than the Registrant

Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-12

CHENIERE ENERGY, INC.
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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CHENIERE ENERGY, INC.
Three Allen Center
333 Clay Street, Suite 3400
Houston, Texas 77002-4102
713/659-1361

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held June 12, 2003

Notice is hereby given that the annual meeting of stockholders of Cheniere
Energy, Inc., a Delaware corporation (the "Company"), will be held on Thursday,
June 12, 2003, at 10:00 a.m., at Three Allen Center, 333 Clay Street, Suite
3400, Houston, Texas, for the following purposes:

1. To elect a Board of six directors to serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified;

2. To approve a proposed amendment to the Company's 1997 Stock Option Plan to
increase the number of shares of common stock subject to the Plan from
2,000,000 to 2,500,000.

3. To appoint Mann Frankfort Stein & Lipp CPAs, L.L.P. as independent
accountants for the Company for the fiscal year ending December 31, 2003;
and

4. To consider and act upon such other business as may properly be presented
to the meeting or any adjournment thereof.

A record of stockholders has been taken as of the close of business on
April 15, 2003, and only those stockholders of record on that date will be
entitled to notice of and to vote at the meeting or any adjournment thereof. All
stockholders of the Company are invited to attend the meeting. The Board of
Directors, however, requests that you promptly sign, date and mail the enclosed
proxy, even if you plan to be present at the meeting. If you attend the meeting,
you can either vote in person or by your proxy. Please return your proxy in the
enclosed, postage-paid envelope.

By order of the Board of Directors,

/S/ DON A. TURKLESON
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Don A. Turkleson
Secretary

April 28, 2003

CHENIERE ENERGY, INC.
Three Allen Center
333 Clay Street, Suite 3400
Houston, Texas 77002-4102
713/659-1361

PROXY STATEMENT

This Proxy Statement and the enclosed proxy are being mailed to
stockholders of Cheniere Energy, Inc., a Delaware corporation (the "Company"),
commencing on or about April 30, 2003. The Company's Board of Directors is
soliciting proxies to be voted at the Company's annual meeting of stockholders
to be held in Houston, Texas on Thursday, June 12, 2003 and at any adjournment
thereof, for the purposes set forth in the accompanying notice.

The shares covered by a proxy, if such is properly executed and
received prior to the meeting, will be voted in accordance with the directions
specified thereon regarding election of directors, proposed amendment to the
Company's 1997 Stock Option Plan to increase the number of shares of common
stock subject to the Plan from 2,000,000 to 2,500,000 and appointment of Mann
Frankfort Stein & Lipp CPAs, L.L.P. as independent accountants, and with respect
to any other matters which may properly come before the meeting, in accordance
with the judgment of the persons designated as proxies. A proxy may be revoked
at any time before it is exercised by giving written notice to, or filing a duly
executed proxy bearing a later date with, the Secretary of the Company, or by
voting in person at the meeting.

Management expects that the only matters to be presented for action at
the meeting will be the election of directors, approval of the proposed
amendment to the Company's 1997 Stock Option Plan to increase the number of
shares of common stock subject to the Plan from 2,000,000 to 2,500,000 and
appointment of Mann Frankfort Stein & Lipp CPAs, L.L.P. as independent
accountants.

At the close of business on April 15, 2003, the record date for
determining the stockholders entitled to notice of and to vote at the meeting
(the "Record Date"), there were outstanding and entitled to vote 14,047,393
shares of the Company's common stock, par value $.003 per share ("Common
Stock"). Each share of Common Stock entitles the holder to one vote on all
matters presented at the meeting.

The Company will bear the costs of soliciting proxies in the
accompanying form. In addition to solicitations by mail, a number of regular
employees of the Company may solicit proxies in person or by telephone.

ELECTION OF DIRECTORS

Nominees

At the meeting, six nominees are to be elected to the Company's Board
of Directors, each director to hold office until the next annual meeting of
stockholders and until his successor is elected and qualified. Unless your proxy
specifies otherwise or withholds authority to vote for one or more nominees
named thereon and described below, it is intended that the shares represented by
your proxy will be voted for the election of these six nominees. Proxies cannot
be voted for a greater number of persons than the number of nominees named. If
any nominee should become unavailable for election, your proxy may be voted for
a substitute nominee selected by the Board, or the Board may be reduced
accordingly. The Board is unaware of any circumstances likely to render any
nominee unavailable.

One of the directors elected at the annual meeting of stockholders held
on May 23, 2002 will be resigning from the Board of Directors at the annual
meeting of stockholders to be held on June 12, 2003. Charles M. Reimer, who was
President and Chief Executive Officer of the Company until resigning those
positions on December 18, 2002, has served as a director since April 1998. Mr.
Reimer resigned his positions with the Company to join Freeport LNG Development,
L.P. as its President and Chief Operating Officer. Cheniere would like to thank
Mr. Reimer for his service to the Company.

Director Nominee Director Since Age Position
------------------- -------------- --- -----------------------------

Nuno Brandolini 2000 49 Director

Keith F. Carney 2001 46 Director

Paul J. Hoenmans 2001 70 Director

John K. Howie 2000 44 Director

Charif Souki 1996 50 Director, Chairman of the
Board of Directors,
President and Chief
Executive Officer

Walter L. Williams 1996 75 Director and Vice Chairman
of the Board of Directors

Nuno Brandolini is currently a director and a member of the Audit
Committee. Mr. Brandolini has served as Chairman and Chief Executive Officer of
Scorpion Holdings, Inc. since 1995. Prior to forming Scorpion Holdings, Mr.
Brandolini served as Managing Director of Rosecliff, Inc., a leveraged buyout
fund co-founded by Mr. Brandolini in 1993. Before joining Rosecliff, Mr.
Brandolini was a Vice President at Salomon Brothers, Inc. where he was an
investment banker involved in mergers and acquisitions in the Financial
Entrepreneurial Group. Mr. Brandolini has also worked for Lazard Freres in New
York and was President of The Baltheus Group, a merchant banking firm, and
Executive Vice President of Logic Capital Corp., a venture capital firm. He
currently serves on the Board of private and public companies such as Arabella,
Pac Pizza LLC, Sonex Research, The Original San Francisco Toymakers and
WalkAbout Computers. Mr. Brandolini was awarded a law degree by the University
of Paris, and received an M.B.A. from the Wharton School.

Keith F. Carney is currently a director and Chairman of the
Compensation Committee. Mr. Carney served as Chief Financial Officer and
Treasurer of the Company from July 1996 through November 1997 and Executive Vice
President from 1997 through August 2001. Since October 2001, Mr. Carney has been
President of Dolomite Advisors, LLC, a manager of energy investment funds. At
that time he was elected a director to Cheniere. Mr. Carney also served as a
member of the Audit Committee from 2001 until April 15, 2003. Prior to joining
Cheniere, Mr. Carney was a securities analyst in the oil and gas
exploration/production sector with Smith Barney, Inc. from 1992-1996. From
1982-1990 he was employed by Shell Oil as an exploration geologist, with
assignments in the Gulf of Mexico, the Middle East and other areas. He received
an M.S. in geology from Lehigh University in 1982 and an M.B.A.-Finance from the
University of Denver in 1992.

Paul J. Hoenmans is currently a director for Cheniere and a member of
the Compensation Committee and the Audit Committee. Mr. Hoenmans has over 22
years of senior executive level experience in the industry. During that time he
has served Mobil Oil Corporation in various executive capacities, most recently
as Director and Executive Vice President, until 1997, with overall
responsibility for policy, strategy, performance, and stakeholder contact. From
1986 through 1996 he served as the President of Mobil Oil Corporation's
Exploration & Producing Division, with worldwide responsibility for upstream
operations. Mr. Hoenmans has held various other positions of senior executive
level responsibility with Mobil since 1975, over both upstream and downstream
operations worldwide throughout the Americas, Africa, Southeast Asia, the Middle
East, Europe, and Scandinavia. Mr. Hoenmans is also currently serving as a
director of Talisman Energy, Inc.

John K. Howie is currently a director of the Company, Chairman of the
Audit Committee and a member of the Compensation Committee. Mr. Howie has served
as a Vice President of EnCap Investments, LLC since July 1999. From January 1994
until July 1999 he was a Senior Investment Associate at Range Resources
Corporation (previously Domain Energy Corporation) and an Acquisition
Coordinator with Domain Energy Corporation (previously Tenneco Ventures). Prior
to this he was a Senior Petroleum Engineer with Apache Corporation. Mr. Howie
received a Bachelor of Science in Chemical Engineering from New Mexico State in
December 1981.

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Charif Souki, a co-founder of Cheniere, is currently Chairman of the
Board of Directors of the Company, President and Chief Executive Officer. Mr.
Souki is an independent investment banker with 20 years of experience in the
industry. In the past few years he has specialized in providing financing for
promising microcap and small capitalization companies with an emphasis on the
oil and gas industry. Mr. Souki received his B.A. from Colgate University and
his M.B.A. from Columbia University. He also serves on the board of directors of
Gryphon Exploration Company, a privately held affiliate of Cheniere.

Walter L. Williams is currently Vice Chairman and a director of the
Company. Prior to joining the Company, Mr. Williams spent 32 years as a founder
and later Chairman and Chief Executive Officer of Texoil, Inc., a publicly held
Gulf Coast exploration and production company. Prior to that time, he was an
independent petroleum consultant. Mr. Williams received a B.S. in petroleum
engineering from Texas A&M University and is a Registered Engineer in Louisiana
and Texas. He has served as a director and member of the Executive Committee of
the Board of the Houston Museum of Natural Science.

Board and Committee Activity and Structure

The Company's operations are managed under the broad supervision and
direction of the Board of Directors, which has the ultimate responsibility for
the establishment and implementation of the Company's general operating
philosophy, objectives, goals and policies. Pursuant to delegated authority,
certain Board functions are discharged by the Board's standing Audit and
Compensation Committees. Members of the Audit and Compensation Committees for a
given year are selected by the Board following the annual stockholders' meeting.
The Board of Directors does not have a standing nominating committee or other
committees performing similar functions. During the fiscal year ended December
31, 2002, the Company's Board of Directors held eight meetings, and in addition
there were two written consents in lieu of meetings, and each incumbent member
of the Board attended or participated in at least 75% of the aggregate number of
(i) Board meetings and (ii) committee meetings held by all committees of the
Board on which he served during his period of service as a director in the year
2002.

The Audit Committee annually recommends independent accountants for
appointment by the Board of Directors, reviews the services to be performed by
the independent accountants, and receives and reviews the reports submitted by
them. The committee also determines the duties and responsibilities of the
Company for the operation of its internal control system and receives and
reviews reports submitted by the Chief Financial Officer. The Audit Committee
held five meetings during the fiscal year ended December 31, 2002. The
committee's members during 2002 were: Nuno Brandolini, Keith F. Carney and John
K. Howie. Mr. Carney served as Chairman until November 20, 2002, when Mr. Howie
was named Chairman of the Audit Committee. Effective April 15, 2003, Mr. Carney
withdrew from the Audit Committee, and the open position was filled by Mr.
Hoenmans. See "Report of the Audit Committee."

The Compensation Committee reviews and approves the salaries and other
compensation for the executive officers of the Company. The Compensation
Committee also determines the eligible persons to whom stock options may be
granted, the time or times at which options shall be granted, the number of
shares of common stock subject to each option, the exercise price for the
purchase of shares subject to each option, the time or times when each option
shall become exercisable and the duration of the exercise period. The committee
also has discretionary authority to interpret the stock option plan, to
prescribe, amend and rescind rules and regulations relating to it, to determine
the details and provisions of each stock option agreement, and to make all
determinations necessary or advisable in administration of the plan. The
Compensation Committee met four times during 2002. The committee's members
during 2002 were: Keith F. Carney, Paul J. Hoenmans and John K. Howie. Mr. Howie
served as Chairman until November 20, 2002, when Mr. Carney was named Chairman
of the Compensation Committee.

Director Compensation

During the fiscal year ended December 31, 2002, directors received no
cash remuneration for serving on the Board of Directors of the Company, nor were
they compensated for attending Board or committee meetings. From time to time,
outside members of the Board of Directors (those who do not serve as executive
officers of the

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Company) are compensated for their services to the Company through the grant of
options to purchase Common Stock of the Company.

In December 2002, the Board of Directors granted options to purchase
20,000 shares of Common Stock to each of its outside directors, Messrs.
Brandolini, Carney, Howie and Hoenmans, in recognition of their service to the
Company. The options vested fully on the date of grant and are not contingent
upon the Company's achievement of earnings goals. The options are exercisable at
a price of $1.25 per share, the closing market price on The American Stock
Exchange on the date of the grants. The options expire five years from the date
of grant.

The Board of Directors recommends a vote FOR the election of the six
nominees as directors of the Company, to serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified.

PROPOSED AMENDMENT TO 1997 STOCK OPTION PLAN
INCREASING NUMBER OF SHARES SUBJECT TO PLAN

The Company's Board of Directors has approved and declared the
advisability of amending the Company's 1997 Stock Option Plan (the "Plan") to
increase the total number of shares of Common Stock subject to the Plan from
2,000,000 to 2,500,000. The amendment would change the first sentence of Article
V Section 5.1 to read:

"Subject to adjustment pursuant to the provisions of Section
5.2 hereof, the maximum number of shares of Common Stock which
may be issued and sold hereunder shall be 2,500,000."

The purpose of the Plan is to advance the interests of the Company and
its stockholders and subsidiaries by attracting, retaining and motivating the
performance of selected directors, officers, and employees of the Company of
high caliber and potential upon whose judgment, initiative and effort the
Company is largely dependent for the successful conduct of its business, and to
encourage and enable such directors, officers, and employees to acquire and
retain a proprietary interest in the Company by ownership of its stock. The
purpose of the amendment is to provide the Company with maximum flexibility and
additional resources with which to achieve the objectives of the Plan.

General and Administration. The Plan provides for the grant of
Nonqualified Stock Options and Incentive Stock Options (collectively,
"Options"). It is administered by a committee (the "Committee") comprised solely
of directors, each of whom is a "non-employee director" as defined in Rule 16b-3
of the Securities Exchange Act of 1934, as amended ("Exchange Act"), as selected
by the Board of Directors; provided, however, with respect to any Nonqualified
Stock Options for directors who are Committee members, the Board of Directors
shall function in the capacity as the Committee under the Plan. The Committee
will select the persons who, from time to time, will receive Options, the number
that they are to receive, the Option price of the shares, the vesting date, and
the expiration date.

Shares of Stock Subject to Plan. Pursuant to the Plan, the Company may
grant Options exercisable for up to 2,000,000 shares of Common Stock, which is
proposed to be increased to 2,500,000. Those shares may be either authorized but
unissued shares or shares held in the Company's treasury. If any outstanding
Option terminates for any reason, the shares of Common Stock subject to the
unexercised portion of such Option become available for new Option grants. The
number of shares of Common Stock which may be issued under the Plan and pursuant
to then outstanding Stock Options are subject to adjustments to prevent
enlargement or dilution of rights resulting from stock dividends, stock splits,
recapitalizations, reorganizations or similar transactions. The market value of
the Common Stock as of April 24, 2003 was $1.76 per share.

Options. The two types of Options which the Committee may grant under
the Plan are Nonqualified Stock Options and Incentive Stock Options. Incentive
Options may only be granted to Eligible Persons who are considered employees of
the Company or any Subsidiary. An Option will be effective on the date it is
approved by the Committee unless the Committee specifies a later effective date.
The Company and the Optionee shall enter into a Stock Option Agreement which
details the terms and conditions of the Options granted. The Committee sets the

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Option price; however, the Option price of an Incentive Stock Option shall not
be less than 100% (110% in the case of certain 10% shareholders) of the fair
market value of a share of Common Stock on the date of grant. A Nonqualified
Stock Option that is intended to qualify as performance based compensation to an
officer subject to Section 162(m) of the Code must be granted with an exercise
price equal to 100% of the fair market value of a share of Common Stock on the
grant date. An Option shall vest and become exercisable as stated in the
applicable Stock Option Agreement, provided that the Optionee is an eligible
Person on the applicable vesting dates. The Committee has sole discretion to
accelerate any Option at any time. An Option must be exercised within ten years
from the date of grant unless a shorter period is specified in the Stock Option
Agreement.

An Option may be exercised wholly or in part, in whole share
increments, at any time within the period permitted for exercise. Only the
Optionee may exercise an Option during the Optionee's lifetime, except that in
the case of an Optionee who is legally incapacitated, the Option shall be
exercisable by the Optionee's guardian or legal representative. Optionees may
not transfer Options other than by will or the laws of descent and distribution.

Tax Consequences to the Company. An Optionee does not recognize any
income for federal tax purposes at the time a Nonqualified Stock Option is
granted, and the Company is not then entitled to a deduction. When any
Nonqualified Stock Option is exercised, the Optionee recognizes ordinary income
in an amount equal to the difference between the fair market value of the shares
on the exercise date and the exercise price of the Nonqualified Stock Option,
and the Company generally recognizes a tax deduction in the same amount.

The Company is not entitled to a tax deduction as the result of the
grant or qualified exercise of an Incentive Stock Option. If an Optionee
disposes of shares acquired upon exercise of an Incentive Stock Option within
either two years after the date of its grant or one year after its exercise, the
disposition is a disqualifying disposition and the Optionee will recognize
ordinary income in the year of such disposition. The Company generally is
entitled to a deduction in the year of the disqualifying disposition in an
amount equal to the ordinary income recognized by the Optionee as a result of
such disposition.

Taxable compensation earned by certain named executive officers subject
to Section 162(m) of the Code in respect of stock options is generally intended
to satisfy the requirements for "qualified performance-based compensation," but
no assurance can be provided that the Company will be able to satisfy these
requirements in all cases, and the Company may, in its sole discretion,
determine in one or more cases that it is in its best interest not to satisfy
these requirements even if it is able to do so.

Termination of Service. Unless otherwise provided in the Stock Option
Agreement, if an Optionee dies after the date of grant, the executor or
administrator of the Optionee's estate, or anyone to whom an outstanding Option
has been validly transferred by will or the laws of descent and distribution,
will have the right, within one year after the Optionee's death, to exercise any
portion of the Option which was exercisable but unexercised at the time of the
Optionee's death. If an Optionee's employment or other service with the Company
or any Subsidiary is terminated due to permanent and total disability at any
time after grant, the Optionee, or his legal guardian or representative, will
have the right, within one year of the date of the Optionee's disability, to
exercise any portion of the outstanding Option which was exercisable but
unexercised at the time of the Optionee's termination due to disability. The
period for exercise of an Option after the date of death or disability is
limited by the maximum term set for exercise in the Stock Option Agreement. The
Committee may determine at or after the grant to make any portion of an Option
that is not exercisable at the date of death or disability immediately vested
and exercisable. Unless otherwise provided in the Stock Option Agreement, if an
Optionee's employment or other service with the Company or any Subsidiary is
terminated for cause (as defined in the Plan), the Optionee's right to exercise
any unexercised portion of any Option will terminate and all rights under any
Option will cease. If an Optionee's employment or other service with the Company
is terminated for any reason other than death, permanent and total disability,
or for cause, the Optionee will have the right to exercise any Option to the
extent it was exercisable and unexercised on the date of termination during the
period which ends the earlier of 90 days after termination or the date that the
Option expires.

Change in Control. Upon a "Change in Control" (as defined in the Plan)
of the Company, the unvested portion of every outstanding Option will become
fully and immediately vested and an Optionee must surrender his or her Option
and receive, for each share of Common Stock issuable under the Option
outstanding at such time, a cash payment equal to the excess of the fair market
value of the Common Stock at the time of the Change in Control

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over the Option price of the Common Stock. The vesting and cash payment
described above will not occur if (i) the Change in Control was approved by at
least two-thirds of the Board who were serving as such immediately prior to the
transaction and (ii) provision has been made in connection with such transaction
for (a) the continuation of the Plan and/or the assumption of such Options by a
successor corporation (or a parent or subsidiary thereof) or (b) the
substitution for such Options of new Options covering the stock of a successor
corporation (or a parent or subsidiary thereof), with appropriate adjustments as
to the number and kinds of shares and exercise prices.

Termination and Amendment. The Plan terminates in April 2007. The Board
may, in its sole discretion and at any earlier date, terminate the Plan;
provided, however, no termination of the Plan shall in any manner affect any
Option already granted under the Plan without the consent of the Optionee or the
permitted transferee of the Option. The Board may at any time and from time to
time, amend or modify the Plan; however, no amendment or modification of the
Plan shall in any manner affect any Option already granted under the Plan
without the consent of the Optionee or the permitted transferee of the Option
and certain amendments may require stockholder approval.

Certain Securities Law Matters. The Company has registered under the
Securities Act of 1933 the common stock reserved for issuance under the Plan on
a registration statement on Form S-8 and intends to register the additional
shares in the same fashion if the amendment to the Plan is approved.

APPOINTMENT OF MANN FRANKFORT STEIN & LIPP CPAs, L.L.P.
AS INDEPENDENT ACCOUNTANTS

The Board of Directors recommends to stockholders that the certified
public accounting firm of Mann Frankfort Stein & Lipp CPAs, L.L.P. ("Mann
Frankfort") serve as the Company's independent accountants for the fiscal year
ending December 31, 2003. Mann Frankfort has served as the Company's independent
accountants since November 2002 and has audited the financial statements of the
Company for the fiscal year ended December 31, 2002.

The Company anticipates that representatives of Mann Frankfort will
participate in the annual meeting of stockholders, may make a statement if they
desire to do so, and will be available to respond to appropriate questions
concerning the Company's financial statements.

The Board of Directors recommends a vote FOR appointment of Mann
Frankfort Stein & Lipp CPAs, L.L.P. as independent accountants.

Changes in the Company's Certifying Accountant

As previously reported in Item 4 of its Current Report on Form 8-K
dated October 22, 2002 (the "8-K"), on October 17, 2002, the Company dismissed
PricewaterhouseCoopers LLP ("PWC") as the Company's principal accountant and
engaged Mann Frankfort as the principal accountant for the fiscal year ending
December 31, 2002. The change in principal accountant was approved by the Audit
Committee of the Company's Board of Directors.

In connection with the audits of the Company's two fiscal years ended
December 31, 2001, and the subsequent interim period through such dismissal,
there were no disagreements between PWC and the Company on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
PWC, would have caused them to make a reference thereto in their report on the
financial statements for such year.

The reports of PWC on the consolidated financial statements of the
Company and subsidiaries as of and for the years ended December 31, 2001 and
2000 did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles,
except the report on the consolidated financial statements as of and for the
year ended December 31, 2001 included an explanatory paragraph regarding the
existence of substantial doubt about the Company's ability to continue as a
going concern, and the report on the consolidated financial statements as of and
for the year ended December 31, 2000 included an explanatory paragraph regarding
the recoverability of the Company's unevaluated oil and gas properties.

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The Company provided PWC with a copy of the disclosures made in Item 4
of the 8-K and requested that PWC furnish it with a letter addressed to the
Securities and Exchange Commission stating whether or not it agreed with the
statements made by the Company in Item 4 of the 8-K and, if not, stating the
respects in which it did not agree. A copy of the letter from PWC to the
Commission was attached to the 8-K as Exhibit 16.1 thereto.

During the Company's two most recent fiscal years ending December 31,
2001 and through the date of the 8-K, the Company did not consult Mann Frankfort
with respect to the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's consolidated financial statements, or any
other matters or reportable events listed in Items 304(a)(2)(i) and (ii) of
Regulation S-K promulgated by the Securities and Exchange Commission.

MANAGEMENT

Executive Officers

The following table sets forth the names, ages and positions of each
executive officer of the Company, all of whom serve at the pleasure of the Board
of Directors and are subject to annual appointment by the Board:

Name Age Position
----------------------------- ------------- ------------------------------------------------------------------

Charif Souki 50 Chairman, President and Chief Executive Officer
Walter L. Williams 75 Vice Chairman
Don A. Turkleson 48 Vice President & Chief Financial Officer, Secretary & Treasurer
Jonathan S. Gross 44 Vice President - Exploration

Charif Souki has served as Chairman of the Board of Directors since
June 1999. On December 18, 2002, Mr. Souki assumed the positions of President
and Chief Executive Officer of the Company. From September 1997 until June 1999
he was Co-Chairman of the Board of Directors, and he served as Secretary of the
Company from July 1996 until September 1997. Mr. Souki also served as a director
of the Company throughout the year ended December 31, 2002. Further information
regarding Mr. Souki is provided above under "Election of Directors--Nominees."

Walter L. Williams has served as Vice Chairman of the Board of
Directors since June 1999. He served as President and Chief Executive Officer of
the Company from September 1997 until June 1999 and as Vice Chairman of the
Board of Directors from July 1996 until September 1997. Mr. Williams served as a
director of the Company throughout the year ended December 31, 2002. Further
information regarding Mr. Williams is provided above under "Election of
Directors--Nominees."

Don A. Turkleson has served as Vice President and Chief Financial
Officer, Secretary and Treasurer of Cheniere since December 1997. Prior to
joining Cheniere in 1997, Mr. Turkleson was employed by PetroCorp Incorporated
from 1983 to 1996, as Controller until 1986, then as Vice President - Finance,
Secretary and Treasurer. From 1975 to 1983, he worked as a Certified Public
Accountant in the natural resources division of Arthur Andersen & Co. in
Houston. Mr. Turkleson received a B.S. in accounting from Louisiana State
University in 1975. He is a director and past Chairman of the Board of
Neighborhood Centers, Inc., a nonprofit organization.

Jonathan S. Gross has served as Vice President-Exploration of Cheniere
since October 2000. He served as Technology Manager of the Company from June
1999 through October 2000. Mr. Gross began his career in 1981 with Amoco
Production Company as an exploration geophysicist. While at Amoco he held senior
technical positions in both domestic and international basins. In 1998 he joined
Zydeco Energy, Inc., where he served as economist, exploration risk specialist,
and project manager. Mr. Gross received a Bachelor of Arts degree in geology
from the University of Chicago, and he is a member of the American Association
of Petroleum Geologists, the Society of Exploration Geophysicists, and the
Houston Geological Society.

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Executive Compensation

The following table reflects all compensation received by the chief
executive officer and by each of the other executive officers of the Company
during the three years ended December 31, 2002, 2001 and 2000 (collectively, the
"Named Executives").

SUMMARY COMPENSATION TABLE

Long Term
Annual Compensation Compensation Awards
---------------------------- ------------------------
Securities Underlying
Name and Principal Position Year Salary Bonus Options/SARs (#)
----------------------------- -------- ------------ --------------- ------------------------

Charif Souki (1) 2002 $182,097 - 50,000
Chairman, President and 2001 $125,000 $ 50,000 120,000
Chief Executive Officer 2000 $120,000 $100,000 112,500

Walter L. Williams 2002 $150,000 - 37,500
Vice Chairman 2001 $150,000 - 80,000
2000 $127,500 - 67,500

Charles M. Reimer (2) 2002 $180,000 - -
Former President and 2001 $180,000 - 120,000
Chief Executive Officer 2000 $ 60,000 - 362,500

Don A. Turkleson 2002 $150,000 - 25,000
Vice President, 2001 $150,000 - 80,000
Chief Financial Officer, 2000 $112,500 - 67,500
Secretary and Treasurer

Jonathan S. Gross 2002 $150,000 - 25,000
Vice President - Exploration 2001 $150,000 - 60,000
2000 $120,000 - 86,250

(1) In October 1998, Mr. Souki commenced providing consulting services to the
Company pursuant to a Services Agreement and was compensated at a rate of
$10,000 per month. Such rate was increased to $15,000 per month in November
2001 and to $20,000 per month in December 2002. Mr. Souki was awarded a
bonus of $50,000 in November 2001. The timing of payment is contingent upon
the occurrence of certain future events.

(2) Mr. Reimer resigned as President and Chief Executive Officer of the Company
in December 2002.

-8-

Option Grants

Stock options granted to Named Executives during the year ended
December 31, 2002 are summarized in the following table:

Individual Grants Potential Realizable Value
--------------------------------------------------------------------------------------------------- at Assumed Annual Rates
Number of Securities % of Total of Stock Price Appreciation
Underlying Options/SARs Exercise or for Option Term
Options/SARs Granted to Employees Base Price Expiration -----------------------------
Name Granted in Fiscal Period Per Share Date 5% 10%
------------------- ------------------------ ----------------------- ------------- ----------- -------------- -------------

Charif Souki 50,000 19.6% $ 1.25 12/19/07 $ 17,268 $ 38,157

Walter L. Williams 37,500 14.7% $ 1.25 12/19/07 $ 12,951 $ 28,618

Charles M. Reimer - - $ - - $ - $ -

Don A. Turkleson 25,000 9.8% $ 1.25 12/19/07 $ 8,634 $ 19,078

Jonathan S. Gross 25,000 9.8% $ 1.25 12/19/07 $ 8,634 $ 19,078

Options granted to Named Executives during 2002 have a term of five
years and vest 33% on each of the first three anniversaries of the date of
grant.

Outside members of the Board of Directors (those who do not serve as
executive officers of the Company) are compensated for their services to the
Company through the grant of options to purchase Common Stock of the Company.

Option Exercises and Year-End Values

The following table sets forth information regarding unexercised
options or warrants to purchase shares of Common Stock granted by the Company to
Named Executives. No Named Executives exercised any Common Stock options during
the fiscal year ended December 31, 2002.

Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs at December 31, 2002 Options/SARs at December 31, 2002 (1)
------------------------------------------------------- -----------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------

Charif Souki 119,167 163,333 $ 8,800 $ 19,100

Walter L. Williams 140,417 119,583 $ 5,867 $ 12,858

Charles M. Reimer 377,917 113,333 $ 8,800 $ 17,600

Don A. Turkleson 102,917 107,083 $ 5,867 $ 12,483

Jonathan S. Gross 91,562 98,438 $ 4,400 $ 9,550

(1) The value of unexercised options and warrants to purchase Common Stock at
December 31, 2002 is calculated based upon The American Stock Exchange
closing market price of $1.28 per share on December 31, 2002.

-9-

Equity Compensation Plan Disclosure Table

The following table summarizes the Company's use of equity securities
as a form of compensation for services rendered to the Company.

Number of securities to be Weighted-average Number of securities
issued upon exercise of exercise price of remaining available for
outstanding options, outstanding options, future issuance under
warrants and rights warrants and rights equity compensation plans
---------------------------- ------------------------ ----------------------------

Equity compensation plans
approved by security holders 1,983,611 $ 2.07 16,389

Equity compensation plans not
approved by security holders 450,000 $ 2.92 -
---------------------------- ----------------------------
Total
2,433,611 $ 2.22 16,389
============================ ============================

The Company has issued warrants for the purchase of 450,000 shares of
its common stock at exercise prices ranging from $1.20 to $11.50 per share as
additional compensation for various services rendered to the Company, including
assistance in private placements of equity securities, investor relations and
marketing of LNG terminal capacity, as well as pursuant to the terms of an
employment agreement.

Indemnification of Officers and Directors

The Company's Certificate of Incorporation provides that the liability
of directors for monetary damages shall be limited to the fullest extent
permissible under Delaware law. This limitation of liability does not affect the
availability of injunctive relief or other equitable remedies.

The Company's Certificate of Incorporation and Bylaws provide that the
Company shall indemnify its directors and officers to the fullest extent
possible under Delaware law. These indemnification provisions require the
Company to indemnify such persons against certain liabilities and expenses to
which they may become subject by reason of their service as a director or
officer of the Company or any of its affiliated enterprises. The provisions also
set forth certain procedures, including the advancement of expenses, that apply
in the event of a claim for indemnification.

-10-

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information with respect to the shares
of Common Stock owned of record and beneficially as of April 15, 2003 by all
persons who own of record or are known by the Company to own beneficially more
than 5% of the outstanding Common Stock, by each director, nominee for director
and Named Executive, and by all directors and executive officers as a group:

Amount and Nature of Percent
Name Beneficial Ownership of Class
----------------------------------------------------- ------------------------- -------------

BSR Investments, Ltd. 1,295,078 (1) 9.2%
Crest Financial Limited 750,000 (2) 5.3%
Exploration Capital Partners 2000 Limited Partnership 715,000 (3) 5.1%
Nuno Brandolini 283,750 (4) 2.0%
Keith F. Carney 216,667 (5) 1.5%
Jonathan S. Gross 99,334 (6) *
Paul J. Hoenmans 70,000 (7) *
John K. Howie 57,500 (8) *
Charles M. Reimer 443,394 (9) 3.1%
Charif Souki 194,017 (10) 1.4%
Don A. Turkleson 141,459 (11) 1.0%
Walter L. Williams 161,042 (12) 1.1%
All Directors and Officers as a group (9 persons) 1,667,163 (13) 10.7%

* Less than 1%

(1) BSR Investments, Ltd. is controlled by Nicole Souki, the President of BSR
and the mother of Charif Souki. Charif Souki disclaims beneficial ownership
of the shares. Includes warrants to purchase 9,434 shares of the Company's
Common Stock. BSR's address is c/o Harney, Westwood & Riegels, Box 71,
Craigmuir Chambers, Road Town, Tortola, B.V.I.

(2) The address for Crest Financial Limited is 600 Travis, Suite 6800, Houston,
Texas 77002.

(3) The address for Exploration Capital Partners 2000 Limited Partnership is
8375 West Flamingo Boulevard, Suite 200, Las Vegas, Nevada 89117.

(4) Includes 70,000 shares issuable upon exercise of currently exercisable
options held by Mr. Brandolini. Also includes warrants to purchase 213,750
shares of Common Stock held by Arabella SA, of which Mr. Brandolini
disclaims beneficial ownership. Mr. Brandolini serves as Chairman and Chief
Executive Officer of Scorpion Holdings, Inc, which manages investments for
Arabella SA. Mr. Brandolini also serves as a director of Arabella SA.

(5) Includes 4,167 shares issuable upon exercise of currently exercisable
warrants and 187,500 shares issuable upon exercise of currently exercisable
options held by Mr. Carney.

(6) Includes 334 shares issuable upon exercise of currently exercisable
warrants, 91,562 shares issuable upon exercise of currently exercisable
options and 4,688 shares issuable upon exercise of options which become
exercisable within 60 days of the filing of this proxy statement. Excludes
93,750 shares issuable upon the exercise of options held by Mr. Gross but
not exercisable within 60 days of the filing of this proxy statement.

(7) Includes 70,000 shares issuable upon exercise of currently exercisable
options held by Mr. Hoenmans.

(8) Includes 57,500 shares issuable upon exercise of currently exercisable
options held by Mr. Howie.

(9) Includes 386,251 shares issuable upon exercise of currently exercisable
warrants. Excludes 113,333 shares issuable upon the exercise of warrants
held by Mr. Reimer but not exercisable within 60 days of the filing of this
proxy statement. In February 2003, all options held by Mr. Reimer were
converted to an equivalent number of warrants with the same terms as had
existed on the options.

(10) Includes 14,250 shares issuable upon exercise of currently exercisable
warrants and 60,500 shares owned by Mr. Souki's wife. Also includes 119,167
shares issuable upon exercise of currently exercisable options.

-11-

Excludes 163,333 shares issuable upon the exercise of options held by Mr.
Souki but not exercisable within 60 days of the filing of this proxy
statement. Does not include 1,285,644 shares nor warrants to purchase 9,434
shares of Cheniere Common Stock held by BSR Investments, Ltd. of which
Charif Souki disclaims beneficial ownership. BSR Investments, Ltd. is
controlled by Nicole Souki, the President of BSR Investments, Ltd. and the
mother of Charif Souki.

(11) Includes 4,167 shares issuable upon exercise of currently exercisable
warrants and 106,042 shares issuable upon exercise of currently exercisable
options. Excludes 103,958 shares issuable upon the exercise of options held
by Mr. Turkleson but not exercisable within 60 days of the filing of this
proxy statement.

(12) Includes 143,542 shares issuable upon exercise of currently exercisable
options and 10,000 shares owned by Mr. Williams' wife. Excludes 116,458
shares issuable upon the exercise of options held by Mr. Williams but not
exercisable within 60 days of the filing of this proxy statement.

(13) Includes an aggregate of 845,313 shares issuable upon exercise of currently
exercisable options, 4,688 shares issuable upon exercise of options which
become exercisable within 60 days of the filing of this proxy statement and
622,919 shares issuable upon exercise of currently exercisable warrants.
Excludes an aggregate of 590,832 shares issuable upon the exercise of
options and warrants not exercisable within 60 days of the filing of this
proxy statement.

REPORT OF THE AUDIT COMMITTEE

The following Report of the Audit Committee does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this Report by reference therein.

During fiscal 2000, the Committee of the Board of Directors developed a
written charter for the Committee, which was approved by the full Board. The
complete text of the charter, which reflects standards set forth in SEC
regulations and The American Stock Exchange rules, is reproduced in the appendix
to the Company's 2001 proxy statement.

The function of the Committee is to assist the Board in fulfilling its
oversight responsibilities through regular or special meetings with management
and the independent accountants on matters relating to:

- the Company's financial reporting in the Quarterly Reports on
Form 10-Q and the Annual Report on Form 10-K,
- the Company's system of internal controls,
- the Company's relationship with its independent accountants,
- the Company's audit and accounting processes generally, and
- the Company's systems and policies to comply with applicable laws
and regulations.

In carrying out this function, the Committee provides independent and
objective oversight of the performance of the Company's financial reporting
process, system of internal controls and legal and regulatory compliance system.
The Committee provides for open, ongoing communication among the independent
accountants, financial and senior management and the Board concerning the
Company's financial and compliance position and affairs. The Committee has the
power to conduct or authorize investigations into any matters within its scope
of responsibilities and shall be empowered to retain independent counsel,
accountants, or others to assist it in the conduct of any investigation. The
Committee's responsibility is oversight, and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
complying with applicable laws and regulations. The persons who served as
members of the Committee during the Company's 2002 fiscal year, other than Keith
F. Carney, are "independent directors" as defined within The American Stock
Exchange rules. Mr. Carney served as Chief Financial Officer and Treasurer of
the Company from July 1996 through November 1997 and as Executive Vice President
from 1997 through August 2001. He left the Company to serve as President of
Dolomite Advisors, LLC, a manager of energy investment funds. Mr. Carney has
served on the Board since October 2001. In 2001, the Board determined that Mr.
Carney's membership on the Audit Committee was required by the best interests of
the Company and its stockholders because his experience as the chief financial
officer of a

-12-

public company made him the most highly qualified individual on the Board to
serve on the Audit Committee. As a result of his employment with the Company
during two of the last three years, Mr. Carney did not satisfy the definition of
an "independent director" under The American Stock Exchange rules. However,
because those rules allow one director who does not meet the definition to
nevertheless serve on the Audit Committee, the Board appointed him to that
position for the reason stated above. Effective April 15, 2003, Mr. Carney
withdrew from the Audit Committee. The open position was filled by Mr. Hoenmans,
and, as a result, all current members of the Audit Committee are "independent
directors." The Board has determined that the Audit Committee membership
includes "audit committee financial experts" as defined in Item 401(h) of
Regulation S-K promulgated by the Securities and Exchange Commission. One of the
"audit committee financial experts" on the Audit Committee is the current
chairman of the committee, Mr. Howie. Mr. Howie is an "independent director" as
defined within the American Stock Exchange rules.

In overseeing the preparation of the Company's financial statements,
the Committee met with both management and the Company's independent accountants
to review and discuss all audited financial statements prior to their issuance
and to discuss significant accounting issues. Management advised the Committee
that all financial statements were prepared in accordance with generally
accepted accounting principles. The Committee's review included discussion with
the outside auditors of matters required to be discussed pursuant to Statement
on Auditing Standards (SAS) No. 61 (Codification of Statements on Auditing
Standards, AU 380) as amended by SAS 90. With respect to the Company's outside
auditors, the Committee, among other things, discussed with Mann Frankfort Stein
& Lipp CPAs, L.L.P. matters relating to its independence, including the written
disclosures and the letter from the outside accountants provided to the
Committee as required by the Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees). Finally, the Committee
continued to monitor the scope and adequacy of the Company's internal control
system. On the basis of these reviews and discussions, the Committee recommended
to the Board of Directors that the Board approve the inclusion of the Company's
audited financial statements in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002 for filing with the Securities and Exchange
Commission.

Members of the Audit Committee
John K. Howie, Chairman
Nuno Brandolini
Paul J. Hoenmans

Pursuant to SEC rules, this section of this Proxy Statement does not
constitute "soliciting material" and should not be deemed "filed" with the SEC
and is not incorporated by reference into the Company's Annual Report on Form
10-K or any other future filing under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates it by reference into a filing.

INDEPENDENT ACCOUNTANTS' FEES

Audit Fees

Aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP and Mann Frankfort Stein & Lipp CPAs, L.L.P. in
connection with the audit of the Company's financial statements and reviews of
interim financial statements for the fiscal year ended December 31, 2002 were
$41,341 and $60,850, respectively.

Financial Information Systems Design and Implementation Fees

During the fiscal year ended December 31, 2002, neither
PricewaterhouseCoopers LLP nor Mann Frankfort Stein & Lipp CPAs, L.L.P. rendered
any professional services in connection with the design and implementation of
financial information systems as used in paragraph (c) (4) (ii) of rule 2-01 of
Regulation S-X.

-13-

All Other Fees

In addition to the fees described above, aggregate fees of $130,736 and
$1,275 were billed to the Company by PricewaterhouseCoopers LLP and Mann
Frankfort Stein & Lipp CPAs, L.L.P., respectively, for the fiscal year ended
December 31, 2002 for other professional services such as tax return
preparation, review of registration statements and consultation related to
comment letters from the Securities and Exchange Commission. The Audit Committee
has discussed the non-audit services provided by PricewaterhouseCoopers LLP and
Mann Frankfort Stein & Lipp CPAs, L.L.P. and the related fees and has considered
whether those services and fees are compatible with maintaining auditor
independence.

General

None of the hours expended on the engagement of Mann Frankfort Stein &
Lipp CPAs, L.L.P. to audit the Company's financial statements for the fiscal
year ended December 31, 2002, were attributed to work performed by persons other
than Mann Frankfort Stein & Lipp CPAs, L.L.P. permanent, full-time employees.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for the fiscal year ended December
31, 2002:

The Compensation Committee, which is comprised of non-employee
directors of the Company, establishes the general compensation policies of the
Company, establishes the compensation plans and compensation levels for officers
and certain other key employees and administers the Company's stock option plan.
The Committee also establishes salary ranges for officers and certain key
employees, and generally approves specific amounts within those ranges on the
recommendation of management.

In establishing compensation policies, the Committee believes that
total compensation of executive officers, as well as other key employees, should
be competitive with other similar oil and gas companies or other business
opportunities available to such executive officers and key employees while,
within the Company, being fair and discriminating on the basis of personal
performance. Periodic awards of stock options are intended to both retain
executives and to motivate them to accomplish long-term growth objectives and
improve long-term market performance.

The Committee has from time to time retained outside compensation
consultants to conduct compensation surveys and advise the Committee concerning
compensation matters, and the Committee has surveyed the executive compensation
levels of companies in the oil and gas industry that are similar to the Company.

The Company seeks to relate a significant portion of the potential
total executive compensation to the Company's financial performance. In general,
executive financial rewards at Cheniere may be segregated into the following
components: salary and stock-based benefits. The Committee has not awarded any
bonus compensation, except for a December 2000 award of $100,000 and a November
2001 award of $50,000 to the Company's Chairman. Payment of the November 2001
award is contingent upon the occurrence of certain liquidity events.

Base compensation for senior executive officers is intended to afford a
reasonable degree of financial security and flexibility to those individuals who
are regarded by the Committee as acceptably discharging the levels and types of
responsibility implicit in their respective executive positions.

-14-

The Committee is of the view that properly designed and administered
stock-based incentives for senior executives closely align the executives'
economic interests with those of stockholders and provide a direct continuing
focus upon the goal of constantly striving to increase long-term stockholder
value. Toward that goal, the Company established the Cheniere Energy, Inc. 1997
Stock Option Plan and has made periodic grants of stock options to its officers
and other key employees. See "Management - Executive Compensation" and
"Management - Option Grants."

Chief Executive Officer's Compensation. The Committee determines the
compensation of the Chief Executive Officer in substantially the same manner as
the compensation of the other officers. In establishing the base salary for Mr.
Reimer and the consulting fee for Mr. Souki for the 2002 fiscal year, the
Committee assessed (i) the performance of the Company, (ii) total return to
stockholders, (iii) progress toward implementation of the Company's strategic
business plan and (iv) compensation levels of chief executive officers of
similar companies in the oil and gas industry. The performance by the Company is
measured by, among other things, corporate net earnings, revenues, growth in net
underlying asset value, stock price and a comparison to similar companies in the
oil and gas industry.

Mr. Reimer served as President and Chief Executive Officer of the
Company until his resignation on December 18, 2002. Mr. Reimer received a base
salary at the rate of $180,000 per year. Effective December 19, 2002, Mr. Souki
assumed the positions of President and Chief Executive Officer and receives a
consulting fee of $240,000 per year.

Omnibus Budget Reconciliation Act of 1993. Section 162(m) of the
Omnibus Budget Reconciliation Act of 1993 limits the deductibility to the
Company of cash compensation in excess of $1 million paid to the Company's chief
executive officer and the next four highest paid officers during any fiscal
year, unless such compensation meets certain requirements. During 2002, the
Committee reviewed compensation programs in light of the requirements of this
law. The Committee does not expect the law to impact the Company in 2003 or for
the foreseeable future in any significant way, if at all.

Members of the Compensation Committee
Keith F. Carney, Chairman
Paul J. Hoenmans
John K. Howie

Compensation Committee Interlocks and Insider Participation

In addition to serving as a member of the Compensation Committee, Mr.
Carney was formerly an officer of the Company. Mr. Carney served as Chief
Financial Officer and Treasurer of the Company from July 1996 through November
1997 and Executive Vice President from 1997 through August 2001.

In addition to serving as a director of the Company, several directors
held positions as executive officers during the fiscal year ended December 31,
2002. Mr. Souki served as Chairman of the Board; Mr. Williams served as Vice
Chairman of the Board. Mr. Reimer served as President and Chief Executive
Officer until his resignation on December 18, 2002, at which time Mr. Souki
assumed the additional positions of President and Chief Executive Officer.

-15-

Common Stock Performance Graph

The following graph compares the cumulative total shareholder return on
the Company's Common Stock against the S&P Oil and Gas (Exploration &
Production) Index, and the Russell 2000 Index for the five years ended December
31, 2002. The Company's Common Stock began trading on the OTC Bulletin Board on
July 3, 1996, moved to the NASDAQ SmallCap Market on April 11, 1997, again
traded on the OTC Bulletin Board beginning December 14, 2000, and began trading
on The American Stock Exchange on March 5, 2001. The graph was constructed on
the assumption that $100 was invested in the Company's Common Stock, the S&P Oil
and Gas (Exploration & Production) Index, and the Russell 2000 Index on December
31, 1997.

COMPARISON OF CUMULATIVE TOTAL RETURN
Among Cheniere Energy, Inc., S&P Oil & Gas (Exploration & Production) Index,
and Russell 2000 Index

[CHART APPEARS HERE]

12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002
------------- ------------ -------------- ------------- ------------- --------------

Cheniere Energy, Inc. $100 $48 $ 35 $ 34 $ 12 $ 16
S&P Oil & Gas (Exploration
& Production) Index $100 $68 $ 81 $130 $102 $101
Russell 2000 Index $100 $97 $116 $111 $112 $ 88

Certain Relationships and Related Transactions

BSR Investments, Ltd. ("BSR"), an entity holding approximately 9.2% of
the outstanding shares of the Company's Common Stock, is under the control of
Nicole Souki, the mother of Charif Souki, Chairman of the Board of Directors,
President and Chief Executive Officer. Charif Souki has been engaged, from time
to time, as a consultant to BSR. Charif Souki disclaims beneficial ownership of
all shares held by BSR.

-16-

BSR purchased $2,000,000 of the notes issued in the Company's
$4,000,000 December 1997 Bridge Financing and pledged a portion of its
investment in Cheniere Common Stock to fund its participation. In conjunction
with the financing, BSR received warrants to purchase 41,667 shares of the
Company's common stock. On September 15, 1998, BSR received warrants to purchase
an additional 100,000 shares of common stock as consideration for extending the
maturity of the notes to that date. Also in September 1998, the exercise price
of the warrants held by BSR was reduced from $9.50 to $6.00 per share as
consideration to extend the maturity date of the notes to January 15, 1999. In
March 1999, BSR exchanged notes payable of $2,000,000 for 694,445 shares of
Cheniere Common Stock ($2.88 per share). In May 1999, BSR purchased from another
note holder $240,000 in short-term notes payable by Cheniere. In July 1999, the
Company repaid $120,000 to BSR at the time it repaid 50% of the outstanding
balances on all of the notes issued in the December 1997 Bridge Financing. On
September 30, 1999, BSR exchanged its remaining $120,000 note payable and $1,000
in accrued interest for 27,500 units ($4.40 per unit), each unit representing
one share of common stock and one half warrant to purchase a share of common
stock at an exercise price of $6.00 per share on or before September 30, 2002.
In April 2000, the Company issued an additional 1,100 units, representing 1,100
shares of Common Stock and warrants to purchase 1,100 shares of Common Stock, to
BSR pursuant to a price adjustment provision included in the September 1999
offering.

All such transactions were approved by the Board of Directors of the
Company, and the Company believes that each such transaction was on terms that
were comparable to, or more favorable to the Company than, those that might have
been obtained by the Company on an arm's length basis from unaffiliated parties.

OTHER MATTERS

Required Vote

Only holders of Common Stock as of the Record Date will be entitled to
vote in person or by proxy at the meeting. A majority of issued and outstanding
shares of Common Stock as of the Record Date represented at the meeting in
person or by proxy will constitute a quorum for the transaction of business.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum. Provided that a quorum is present at the
meeting, (i) the six director nominees who receive the greatest number of votes
cast for election by stockholders entitled to vote therefor will be elected
directors, (ii) the proposed amendment to the Company's 1997 Stock Option Plan
will require approval by a majority of shares entitled to vote thereon at the
meeting and (iii) approval of Mann Frankfort Stein & Lipp CPAs, L.L.P. as
independent accountants will require approval by a majority of shares
represented in person or by proxy and entitled to vote at the annual meeting.
Because broker non-votes are not considered "shares present" with respect to
matters requiring the affirmative vote of a majority of shares represented in
person or by proxy at the meeting, broker non-votes will not affect the outcome
with respect to the proposed amendment to the Company's 1997 Stock Option Plan
and the approval of Mann Frankfort Stein & Lipp CPAs, L.L.P. as independent
accountants. Abstentions with respect to the proposed amendment to the Company's
1997 Stock Option Plan and the approval of Mann Frankfort Stein & Lipp CPAs,
L.L.P. as independent accountants will have the same effect as a vote against
approval thereof, but will have no effect with respect to the election of
directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Under Section 16(a) of the Exchange Act, directors, certain officers,
and beneficial owners of 10% or more of any class of the Company's stock
("Reporting Persons") are required from time to time to file with the Securities
and Exchange Commission and The American Stock Exchange reports of ownership and
changes of ownership. Reporting Persons are required to furnish the Company with
copies of all Section 16(a) reports they file. Based solely on its review of
forms and written representations received from Reporting Persons by it with
respect to the fiscal year ended December 31, 2002, the Company believes that
all filing requirements applicable to the Company's officers, directors and
greater than 10% stockholders have been met.

-17-

Stockholder Proposals

Management anticipates that the Company's 2004 annual stockholders
meeting will be held during May 2004. Any stockholder who wishes to submit a
proposal for action to be included in the proxy statement and form of proxy
relating to the Company's 2004 annual stockholders meeting must submit the
proposal to the Company on or before December 24, 2003. Any such proposals
should be timely sent to the Secretary of the Company, 333 Clay Street, Suite
3400, Houston, Texas 77002-4102. Such proposal must meet all of the requirements
of the Securities and Exchange Commission to be eligible for inclusion in the
Company's 2004 proxy materials. Furthermore, proposals by stockholders may be
considered untimely if the Company has not received notice of the proposal at
least forty-five days prior to the mailing of the proxy materials.

Availability of Annual Report

The Company is including herewith a copy of its Annual Report on Form
10-K for the fiscal year ended December 31, 2002, which has been filed with the
Securities and Exchange Commission in Washington, D.C. and is incorporated in
this Proxy Statement by reference.

The Company will furnish to any person any exhibits described in the
list accompanying such report upon payment of reasonable fees relating to the
Company's furnishing such exhibits. Requests for copies should be directed to
the Company at 333 Clay Street, Suite 3400, Houston, Texas 77002-4102.

By order of the Board of Directors,

/S/ DON A. TURKLESON
--------------------
Don A. Turkleson
Secretary

April 28, 2003

-18-

APPENDIX A

CHENIERE ENERGY, INC.
Charter of the Audit Committee
of the Board of Directors

I. Effectiveness

When approved by the Board of Directors of the Corporation (the "Board"),
this Audit Committee Charter will supersede the Committee's previously
existing charter in its entirety.

II. Function

The function of the Audit Committee is to assist the Board in fulfilling
its oversight responsibilities through regular or special meetings with
management and the independent auditor on matters relating to

- the Corporation's financial reporting in the Quarterly Reports on Form
10-Q and the Annual Report on Form 10-K,

- the Corporation's system of internal controls,

- the Corporation's audit and accounting processes generally, and

- the Corporation's systems and policies to comply with applicable laws
and regulations.

In carrying out this function, the Committee provides independent and
objective oversight of the performance of the Corporation's financial
reporting process, system of internal controls and legal and regulatory
compliance system. The Committee will monitor the qualifications,
independence and performance of the Corporation's internal and independent
auditors and shall prepare the report required to be included in the
Company's annual proxy statement (or any other report) under the rules of
the Securities and Exchange Commission ("SEC"). The Committee provides for
open, ongoing communication among the independent auditor, financial and
senior management, internal auditors (if any), compliance officers (if any)
and the Board concerning the Corporation's financial and compliance
position and affairs.

The Committee meets as frequently as necessary, but at a minimum it shall
meet four times per year. The Committee shall conduct special meetings as
determined by the Chairman of the Audit Committee or at the request of the
President or Chief Financial Officer or the independent public accounting
firm engaged by the Company to perform audit services on behalf of the
Corporation (referred to in this Charter as the "independent auditor"). The
Committee shall maintain minutes of all its meetings.

The Committee maintains independence both in establishing its agenda and
directly accessing various officers and employees of the Corporation. The
Committee shall have the authority to meet with management, internal
auditing personnel, the independent auditor or any other person in a
separate independent session. For the transaction of any business at any
meeting of the Committee, a majority of the members shall constitute a
quorum. The Committee shall take action by the affirmative vote of a
majority of the Committee members present at a duly held meeting. A
Chairman of the Committee shall be designated by the Board.

The Committee has the power to conduct or authorize investigations into any
matters within its scope of responsibilities and shall be empowered to
retain independent counsel, accountants, or others to assist it in the
conduct of any investigation.

III. Committee Membership

The Audit Committee is comprised of at least three Board members, none of
whom has been an officer or employee of the Corporation, its subsidiaries
or affiliates for the current year or any of the prior three years.
Committee members are independent of management and free of any
relationship that, in the opinion of the Board, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a

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committee member. Each of the members of the Committee shall meet the
requirements of being an "independent director" and "able to read and
understand fundamental financial statements," as such qualifications are
set forth in the rules of The American Stock Exchange and interpreted by
the Board. In addition, at least one member of the Committee shall have
past employment experience in finance or accounting or financial oversight
responsibilities that results in such person having "financial
sophistication," again as such qualification is set forth in the rules of
The American Stock Exchange and interpreted by the Board.

IV. Responsibilities

The Audit Committee's responsibility is oversight, and it recognizes that
the Corporation's management is responsible for preparing the Corporation's
financial statements and complying with applicable laws and regulations.
Additionally, the Committee recognizes that financial management (including
the internal audit staff, if any), the independent auditor and the
Corporation's compliance officers (if any) have more knowledge and more
detailed information about the Corporation than do the members of the
Committee. Consequently, in carrying out its oversight responsibilities it
is not the duty of the Committee to plan or conduct audits or determine
that the Corporation's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is
the responsibility of management and the independent auditor. It is also
not the duty of the Committee to resolve disagreements, if any, between
management and the independent auditor or to assure compliance with
applicable laws and regulations.

It is not the intent of this Audit Committee Charter to subject members of
the Committee to any increased exposure to liabilities in excess of those
generally imposed on members of the Board under applicable laws.

The following functions shall be the common recurring activities of the
Committee in carrying out its oversight responsibility. The Committee shall
have and may exercise all powers and authority of the Board in connection
with carrying out its functions and responsibilities. These functions are
set forth as a guide with the understanding that the Committee may diverge
from this guide as appropriate given the circumstances. In carrying out its
responsibilities, the Committee shall:

A. Maintain a channel of communication between the Board and each of (i)
the independent auditors, (ii) the Chief Financial Officer and (iii)
the internal auditor (if any) and (iv) the chief compliance officer
(if any) and provide sufficient opportunity for each to meet with the
members of the Committee to discuss any matter within the scope of
each of their respective responsibilities.

B. Review the internal audit functions of the Corporation and consider,
in consultation with the independent auditor and the Chief Financial
Officer, the adequacy of the internal controls.

C. Review with management and the independent auditor the financial
information contained in the Corporation's Quarterly Report on Form
10-Q prior to its filing, the Corporation's earnings announcements
prior to release, and the results of the independent auditor's review
of interim financial information pursuant to SAS 71. This review may
be conducted, either in person or by telephone conference call, by the
entire Committee or an appropriate quorum thereof.

D. Review with management and the independent auditor at the completion
of the annual audit of the Corporation's financial statements included
in the Annual Report on Form 10-K for the last fiscal year and prior
to its filing:

(1) the Corporation's annual financial statements and related
footnotes;

(2) the independent auditor's audit of the financial statements and
their report;

(3) any significant changes required in the independent auditor's
examination plan;

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(4) any serious difficulties or disputes with management encountered
during the course of the audit; and

(5) other matters related to the conduct of the audit which are to be
communicated to the Committee under generally accepted auditing
standards, including discussions relating to the independent
auditor's judgments about such matters as the quality, not just
the acceptability, of the Corporation's accounting practices and
other items set forth in SAS 61 (Communication with Audit
Committees) or other such auditing standards that may in time
modify, supplement or replace SAS 61.

E. Recommend to the Board whether the Corporation's annual audited
financial statements and accompanying notes should be included in the
Corporation's Annual Report on Form 10-K.

F. Prepare and review the Audit Committee Report for inclusion in the
proxy statement for the Corporation's annual meeting of shareholders.
In addition to all of the other items required to be included in such
report by the rules promulgated by the SEC or other applicable law,
the Audit Committee Report must state whether the Audit Committee:

(1) has reviewed and discussed the audited financial statements with
management;

(2) has discussed with the independent auditor the matters required
to be discussed by SAS 61, as may be modified, supplemented or
replaced;

(3) has received the written disclosures from the independent auditor
required by Independence Standards Board Standard No. 1, as may
be modified, supplemented or replaced, and has discussed with the
accountants their independence; and

(4) has recommended to the Board of Directors, based on the review
and discussions referred to in above items (1) through (3), that
the Corporation's financial statements be included in the Annual
Report on Form 10-K for the last fiscal year for filing with the
Securities and Exchange Commission.

G. Maintain responsibility for the selection, evaluation and, where
appropriate, replacement of the independent auditor, with selection
for the ensuing calendar year being submitted to the shareholders for
ratification or rejection at the annual meeting of shareholders.

H. Review and approve the scope of the engagement of the independent
auditor.

I. Review the experience and qualifications of the senior members of the
independent auditor's team and the quality control procedures of the
independent auditor. Review and discuss with independent auditor the
independence of the independent auditor, giving consideration to the
range of audit and non-audit services performed.

J. Approve in advance all non-audit services to be provided by the
independent auditor and the fees for such services. The Committee may
delegate to one or more members the authority to pre-approve auditing
and non-auditing services that are otherwise permitted by law,
provided, that such pre-approval shall be presented to the full
Committee at its next scheduled meeting.

K. Recognize that the independent auditor is ultimately accountable to
the Committee.

L. Review the scope and results of the annual audit, the report of the
audit, any related management letter, management's responses to
recommendations made by the independent auditor, reports of the
internal auditor that are material to the Corporation as a whole, and
management's responses to those reports.

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M. Ensure the annual receipt from the independent auditor of a formal
written statement delineating all relationships between the
independent auditor and the Corporation, consistent with Independence
Standards Board Standard No. 1, actively engage in a dialogue with the
accountants with respect to any disclosed relationships or services
that may impact the objectivity and independence of the accountants
and take, or recommend that the Board takes, appropriate action to
oversee the independence of such auditor.

N. Review and approve the independent auditor's compensation.

O. Review the appointment and replacement of the Chief Financial Officer
and the chief compliance officer, if any.

P. Consider major changes and other major questions of choice respecting
the appropriate auditing and accounting practices to be used in the
preparation of the financials when presented by the independent
auditor or management.

Q. Review with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures, if any, on the Corporation's financial statements.

R. Review and approve procedures to receive and handle complaints of
individuals, including employees, relating to financial and reporting
practices.

S. Review and reassess the adequacy of the audit committee charter on an
annual basis.

T. Review and approve all related party transactions.

U. Obtain reports from management and the independent auditor that the
acts and conduct of the Corporation's executives are in conformity
with applicable legal requirements.

V. Review with outside legal counsel matters that may have a material
impact on the financial statements, the Corporation's compliance
policies and any material reports or inquiries received from
regulators or governmental agencies.

W. Report to the Board as and when it deems necessary or desirable.

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APPENDIX B

CHENIERE ENERGY, INC.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 12, 2003

The undersigned hereby appoints Jonathan S. Gross and Don A. Turkleson, and each
of them, either one of whom may act without joinder of the other, each with full
power of substitution and ratification, attorneys and proxies of the undersigned
to vote all shares of Cheniere Energy, Inc. which the undersigned is entitled to
vote at the annual meeting of stockholders to be held at Cheniere's offices at
Three Allen Center, 333 Clay Street, Suite 3400, Houston, Texas on Thursday,
June 12, 2003 at 10:00 a.m., Houston, Texas time, and at any adjournment
thereof.

(To be Voted and Signed on Reverse Side)

Please date, sign and mail your
proxy card back as soon as possible!

Annual Meeting of Stockholders
CHENIERE ENERGY, INC.

June 12, 2003

Please Detach and Mail in the Envelope Provided

A Please mark your votes.

1. ELECTION OF DIRECTORS WITHHOLD authority to Nominees: Nuno Brandolini
FOR election (except as indicated below) vote for all nominees Keith F. Carney
listed at right Paul J. Hoenmans
John K. Howie
Charif Souki
Walter L. Williams

INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name on the line below.

-----------------------------

2. Approval of the amendment to the 1997 Stock Option Plan FOR AGAINST ABSTAIN
increasing the total number of shares of Common Stock to 2,500,000.

3. Appointment of Mann Frankfort Stein & Lipp CPAs, L.L.P. as independent
accountants for the fiscal year ending December 31, 2003. FOR AGAINST ABSTAIN

4. In their discretion, upon such other matters (including procedural and
other matters relating to the conduct of the meeting) which may properly
come before the meeting and any adjournment thereof. FOR AGAINST ABSTAIN

THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE
HEREON. IF NO CONTRARY SPECIFICATION IS MADE, THEN THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE SIX DIRECTOR NOMINEES NAMED IN ITEM 1 AND
FOR EACH OF THE PROPOSALS IDENTIFIED IN ITEMS 2, 3 AND 4.

THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS AND THE PROXY STATEMENT FURNISHED HEREWITH. PLEASE
DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED, PRE-ADDRESSED
STAMPED ENVELOPE.

Signature(s) of Stockholder: _________________________________________________
Dated this ____ day of _____________, 2003.

Note: Please sign exactly as your name appears on your stock certificate.
When signing as executor, administrator, trustee or other
representative, please give your full title. All joint owners should
sign.

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