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                                                                    Exhibit 10.7

                                OPTION AGREEMENT

     This Option Agreement ("Option Agreement"), dated February 27, 2003 (the
"Effective Date"), is entered into between Freeport LNG Investments, LLC, a
Delaware limited liability company ("Investments"), and Cheniere Energy, Inc., a
Delaware corporation ("Cheniere"). Each of Investments and Cheniere is sometimes
referred to herein as a "Party," and together, are sometimes referred to herein
as the "Parties."

                                 R E C I T A L S

     A. The Parties, Freeport LNG-GP, Inc., a Delaware corporation (the "General
Partner"), Cheniere LNG, Inc., a Delaware corporation ("Cheniere LNG") and
Freeport LNG Terminal, LLC, a Delaware limited liability company ("Terminal
LLC," and together with Cheniere and Cheniere LNG, the "Cheniere Entities")
executed a Contribution Agreement, dated August 26, 2002, as amended by the
Extension and Amendment to the Contribution Agreement, dated September 19, 2002,
the Second Extension and Amendment to the Contribution Agreement, effective as
of October 4, 2002, and the Third Amendment to the Contribution Agreement, dated
as of the Effective Date (collectively, the "Contribution Agreement");

     B. Pursuant to Section 5.2(b) of the Contribution Agreement, Investments
agreed to enter into this Option Agreement at Closing; and

     C. Pursuant to Section 6.2(d)(v) of the Contribution Agreement,
Investments' execution of this Option Agreement is a condition to the Cheniere
Entities Closing the Contribution Agreement.

     D. Capitalized terms used herein and not otherwise defined herein have the
meaning given to them in the Contribution Agreement.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto do hereby agree
as follows:

     1. Grant of Option. Investments grants to Cheniere the right and option to
acquire 40% of any payment, interest or value (collectively, an "Interest") held
or received by Investments or any of its Affiliates (hereinafter collectively,
"Investments") in (a) any Freeport LNG Facility, other than the Project (a
"Second Freeport LNG Facility") or (b) any partnership, joint venture,
corporation or entity formed by Investments to pursue the development of any
Second Freeport LNG Facility (the "Option"); provided, however, that the Option
and the Interest Cheniere shall acquire upon exercise of the Option (the
"Cheniere Interest") shall not include the right to acquire any percentage of
any compensation or payment paid to Investments for services rendered by
Investments to such Second Freeport LNG Facility, unless the terms of such
compensation and payment paid to Investments for services rendered are less
favorable to the Second Freeport LNG Facility than could be obtained in arms
length negotiations with unrelated third parties.

     2. Terms and Conditions. Such Cheniere Interest shall be on the same terms
and subject to the same conditions, including, but not limited to, any payment
terms, as the Interest Investments holds (directly or indirectly) in such Second
Freeport LNG Facility (the "Investment

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Interest"). In addition, the Cheniere Interest shall be subject to the same
proportionate dilution as the Investment Interest.

     3.   Exercise of Option. Upon Investments acquiring an Investment Interest
in any Second Freeport LNG Facility or the formation of any partnership, joint
venture, corporation or entity to do the same, then:

          (a)  Investments must provide Cheniere written notice stating (i) that
               Investments has acquired an Investment Interest in a Second
               Freeport LNG Facility, (ii) the general terms of the Investment
               Interest in such Second Freeport LNG Facility and (iii) that
               Cheniere may exercise its Option to acquire a Cheniere Interest
               (a "Option Notice).

          (b)  At any time prior to the end of the 30-Day Period (as defined
               below), Cheniere shall have the right to request (i) detailed
               information regarding the Investment Interest in the Second
               Freeport LNG Facility and (ii) reasonable access to legal,
               accounting and business due diligence regarding the Second
               Freeport LNG Facility (collectively, "Due Diligence Material").
               Investments shall provide Cheniere with reasonable access to the
               Due Diligence Material.

          (c)  Within 30 days of receipt of such Option Notice (the "30-Day
               Period"), Cheniere shall have the right to notify Investments in
               writing of its intent to exercise the Option (an "Election
               Notice"). Upon delivery of the Election Notice, (i) Cheniere and
               its Representatives (as defined below) shall be deemed to be
               satisfied with the results of their legal, accounting and due
               diligence investigation and (ii) Cheniere shall then be obligated
               to enter into such definitive documents as are deemed necessary
               to evidence the Cheniere Interest in such Second Freeport LNG
               Facility (the "Definitive Documents").

     If Cheniere fails to deliver an Election Notice to Investment before 5:00
p.m. (MT) on the last day of such 30-Day Period, it will be assumed that
Cheniere does not intend to exercise its Option with regard to such Second
Freeport LNG Facility discussed in such Option Notice and thereby waives any
rights it has hereunder to such Cheniere Interest in such Second Freeport LNG
Facility.

     4.   Confidentiality.

          (a)  Cheniere hereby agrees that it will hold in strictest confidence
               any and all Evaluation Material (as defined below), and shall not
               disclose such Evaluation Material to any person except those
               employees, directors, officers, agents, advisors, consultants,
               affiliates or representatives of Cheniere (the "Representatives")
               who have a need to know in the course of the performance of their
               duties; provided that (a) each such Representative shall be bound
               by obligations of confidentiality no less stringent than as set
               forth in this Option Agreement, (b) Cheniere shall expressly
               disclose the confidential nature of the Evaluation Material to
               the Representatives and shall direct each Representative not to
               disclose to

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               any other person any Evaluation Material and agrees to take such
               appropriate action by instruction or agreement with its
               Representatives to satisfy its obligations hereunder and (c)
               Cheniere agrees to be responsible for any breach of this Option
               Agreement by its Representatives. Cheniere shall use such
               Evaluation Material only for the purpose for which it is
               disclosed and shall not otherwise use or exploit it for its own
               benefit without the prior written consent of Investments.

          (b)  For purposes of this Section 4, "Evaluation Material" shall
               include without limitation any and all information, ideas, data,
               reports, analyses, compilations, studies, interpretations,
               projections, forecasts, records, designs, methods, discoveries,
               improvements, products or services, trade secrets, product data
               and specifications, proprietary rights, business affairs, product
               developments, customer information or employee information and
               other materials that were provided to Cheniere in the course of
               (a) notifying Cheniere of its right to exercise the Option,
               including, but not limited to, the Option Notice and (b)
               assisting Cheniere in its decision regarding the exercise of the
               Option, including, but not limited to, the Due Diligence
               Material. The term "Evaluation Material" shall also include all
               information, data, reports, analyses, computations, studies,
               interpretations, projections, forecasts, records, notes,
               memoranda, summaries or other materials in whatever form
               maintained, whether documentary, computerized or otherwise,
               whether prepared by Cheniere or one of its Representatives, that
               contain or otherwise reflect or are based upon, in whole or in
               part, any such Evaluation Material or that reflect the Cheniere's
               or its Representative's assessment on whether to exercise the
               Option. The term "Evaluation Material" shall not include (1)
               information generally available to the public and (2) information
               independently developed or acquired by Cheniere or its
               Representatives without reliance in any way on other Evaluation
               Material.

          (c)  If Cheniere decides not to exercise the Option, Cheniere shall
               return promptly to Investments, or destroy, all copies, extracts
               or other reproductions in whole or in part of the Evaluation
               Material in the possession of Cheniere or its Representatives.
               Such destruction shall, if requested, be certified in writing to
               Investments by an authorized officer of Cheniere supervising such
               destruction. Notwithstanding the return or destruction of the
               Evaluation Material, Cheniere and its Representatives will
               continue to be bound by Cheniere's obligations of confidentiality
               and other obligations hereunder.

     5.   Closing. The closing ("Option Closing") of the purchase of the
Cheniere Interest shall on a date set forth by Investments, which date shall be
reasonably available to Cheniere and shall be in no event earlier than 15 days
after receipt of the Election Notice. The Option Closing shall take place at the
office of Brownstein, Hyatt & Farber, P.C., 410 17/th/ Street, Suite 220, Denver
Colorado. At the Closing:

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          (a)  Cheniere shall execute the Definitive Documents;

          (b)  If applicable, Cheniere shall provide the necessary funds or
               property to acquire the Cheniere Interest; and

          (c)  Cheniere shall pay its proportionate share of all costs and
               expenses incurred by the Second Freeport LNG Facility as of the
               Option Closing, to the extent, and on the same terms, as
               Investments is obligated to incur such costs and expenses, and
               shall covenant and agree to pay its proportionate share of all
               future costs and expenses incurred by the Second Freeport LNG
               Facility and any future capital calls made by such Second
               Freeport LNG Facility, to the extent, and on the same terms, as
               Investments is obligated to incur such costs and expenses or make
               such future capital call.

     6.   Representations and Warranties of Cheniere. Cheniere represents and
warrants to Investments that as of the date hereof and as of the Closing (a)
Cheniere is corporation, duly organized validly existing and in good standing
under the laws of the State of Delaware, (b) Cheniere has the corporate power
and authority to enter into this Option Agreement, and to consummate the
transactions contemplated hereby and (c) that this Option Agreement constitutes
a legal, valid and binding obligation of Cheniere enforceable against Cheniere
in accordance with its terms.

     7.   Covenants of Cheniere. Cheniere acknowledges and agrees that it shall
be solely responsible for all obligations of the Cheniere Entities with regard
to the Option or any Cheniere Interest under the Contango Option.

     8.   Representations and Warranties of Investments. Investments represents
and warrants to Cheniere that as of the date hereof and as of the Closing Date
(a) Investments is a limited liability company duly organized validly existing
and in good standing under the laws of the State of Delaware, (b) Investments
has the limited liability company power and authority to enter into this Option
Agreement and to consummate the transactions contemplated hereby and (c) that
this Option Agreement constitutes a legal, valid and binding obligation of
Investments enforceable against Investments in accordance with its terms.

     9.   Termination. In the event that Cheniere delivers the Exercise Notice
to Investments and then fails to consummate the Option Closing on the date set
by Investments (subject to such extensions as shall be mutually agreed to by the
Parties), in addition to any other remedies available under law and equity, this
Option Agreement shall immediately terminate and Investments shall be entitled
to pursue any Interest in a Second Freeport LNG Facility without any further
obligation to Cheniere hereunder.

     10.  No Third Party Beneficiaries. Except as specifically set forth herein,
this Option Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted assigns.

     11.  Entire Option Agreement. This Option Agreement constitutes the entire
Option Agreement between the Parties and supersedes any prior understandings,
Option Agreements or representations by or between the Parties, written or oral,
to the extent they relate in any way to the subject matter hereof or thereof.

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     12.  Assignment. Except as set forth below, this Option Agreement and any
rights and obligations hereunder shall not be assignable or transferable by
Cheniere (including by operation of law, in connection with a merger or sale of
stock, or sale of substantially all the assets of Cheniere) without the prior
written consent of the Investments and any purported assignment without such
consent shall be void and without effect.

     13.  Counterparts; Facsimile Signatures. This Option Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument. Each
Party hereto agrees to accept the facsimile signature of the other Party hereto
and to be bound by its own facsimile signature; provided, however, that the
Parties shall exchange original signatures by overnight mail.

     14.  Headings. The section headings contained in this Option Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Option Agreement.

     15.  Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed received (a) upon confirmation
of an electronic mail or facsimile message, (b) one Business Day following the
date sent when sent by overnight delivery via a reputable courier or (c) five
Business Days following the date mailed when mailed by registered or certified
mail return receipt requested and postage prepaid, at the following addresses:

     If to the Cheniere:

          Cheniere Energy, Inc.
          333 Clay St., Suite 3400
          Houston, TX  77002
          Facsimile: (713) 659-5459
          Attn: Charif Souki

     with a copy to:

          Andrews & Kurth, L.L.P.
          600 Travis, Suite 4200
          Houston, TX  77002
          Facsimile: (713) 220-4285
          Attn: Michael Overman, Esq.

     If to Investments:

          1200 Smith Street
          Suite 600
          Houston, TX 77002
          Facsimile: (713) 980-2903
          Attn: Michael S. Smith

     with copies to:

          Brownstein Hyatt & Farber, P.C.
          410 Seventeenth Street, 22nd Floor

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         Denver, CO 80202
         Facsimile: (303) 223-1111
         Attn:  Steven C. Demby, Esq.

     Any Party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, or ordinary mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party may change the address
to which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other Party notice in the manner herein set
forth.

     16. Governing Law. This Option Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) to the extent such provisions or rules
would apply the law of another jurisdiction.

     17. Amendments and Waivers. No amendment of any provision of this Option
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent to such occurrence.

     18. Severability. Any term or provision of this Option Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

     19. Expenses. Except as otherwise expressly provided in this Option
Agreement, each Party will pay all of its costs and expenses, including
attorneys' and accountants' fees, in connection with the negotiation of this
Option Agreement, the performance of its obligations and the consummation of the
transactions contemplated by this Option Agreement.

     20. Construction. The Parties have participated jointly in the negotiation
and drafting of this Option Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Option Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Option Agreement.

     21. Attorneys Fees. If either Party brings any suit, action, counterclaim,
or arbitration to enforce the provisions of this Option Agreement (including
without limitation enforcement of any award or judgment obtained with respect to
this Option Agreement), the prevailing Party shall be entitled to recover a
reasonable allowance for attorneys' fees, litigation expenses, and the cost of
arbitration in addition to court costs.

     22. Jurisdiction. Each Party agrees that all Actions arising out of or
based upon this Option Agreement or the subject matter hereof shall be brought
and maintained exclusively in the federal courts located in the City of Houston
in the State of Texas. Each Party by execution hereof (i) hereby irrevocably
submits to the jurisdiction of the federal courts located in the State of Texas
for the purpose of any Action arising out of or based upon this Option Agreement
or

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the subject matter hereof and (ii) hereby waives to the extent not prohibited by
applicable Law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such Action any claim that it is not subject personally to the
jurisdiction of the above-named court, that it is immune from extraterritorial
injunctive relief, that its property is exempt or immune from attachment or
execution, that any such Action may not be brought or maintained in the
above-named court, should be dismissed on the grounds of forum non conveniens,
should be transferred to any court other than the above-named court, should be
stayed by virtue of the pendency of any other Action in any court other than the
above-named court, or that this Option Agreement or the subject matter hereof
may not be enforced in or by the above-named court. Each Party hereby consents
to service of process in any such Action in any manner permitted by the laws of
the State of Texas, agrees that service of process by registered or certified
mail, return receipt requested, at the address specified in or pursuant to
Section 15 hereof is reasonably calculated to give actual notice and waives and
agrees not to assert by way of motion, as a defense or otherwise, in any such
Action any claim that service of process made in accordance with Section 15
hereof does not constitute good and sufficient service of process. The
provisions of this Section 22 shall not restrict the ability of any Party to
enforce in any court any judgment obtained in the state or federal courts
located in the State of Texas.

     23. Waiver of Jury. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH
CANNOT BE WAIVED, EACH PARTY TO THIS OPTION AGREEMENT HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS OPTION
AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER
ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE. ANY OF THE
PARTIES HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS ARTICLE XI
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES HERETO
TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

                            [Signature Page Follows]

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     IN WITNESS WHEREOF, the Parties have caused this Option Agreement to be
executed individually or by their duly authorized officers on the date first
above written.

CHENIERE:                                     CHENIERE ENERGY, INC.


                                              By:    /s/ Charif Souki
                                                     ---------------------------
                                              Name:  Charif Souki
                                              Title: Chairman


INVESTMENTS:                                  FREEPORT LNG INVESTMENTS, LLC


                                              By:    /s/ Michael S. Smith
                                                     ---------------------------
                                              Name:  Michael S. Smith
                                              Title: Managing Member

                      [Signature Page to Option Agreement]

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