----

----

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------------|

|                                                           |                                                |
|----------------------------------------------------------------|-----------------------------------------------------|
| Delaware                                                       | 20-5913059                                          |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
|                                                           |                                                |
| 700 Milam Street, Suite 800Houston, Texas                      | 77002                                               |
| (Address of principal executive offices)                       | (Zip Code)                                          |

|                                                |                                                                                                                                  |
|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
| Large accelerated filer  ¨           | Accelerated filer                    S |
| Non-accelerated filer    ¨ | Smaller reporting company   ¨                                                                                     |
| (Do not check if a smaller reporting company)       |

----

|         | PART I. FINANCIAL INFORMATION                                                               |   |
|--------------|---------------------------------------------------------------------------------------------|--------|
|         |                                                                                        |   |
| Item 1. | Consolidated Financial Statements                                                           | 1      |
|         | Consolidated Balance Sheets                                                                 | 1      |
|         | Consolidated Statements of Operations                                                       | 2      |
|         | Consolidated Statement of Partners’ Capital (Deficit)                                 | 3      |
|         | Consolidated Statements of Cash Flows                                                       | 4      |
|         | Notes to Consolidated Financial Statements                                                  | 5      |
|         |                                                                                        |   |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12     |
|         |                                                                                        |   |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk                                  | 21     |
|         |                                                                                        |   |
| Item 4. | Disclosure Controls and Procedures                                                          | 22     |
|         |                                                                                        |   |
|         | PART II. OTHER INFORMATION                                                                  |   |
|         |                                                                                        |   |
| Item 1. | Legal Proceedings                                                                           | 23     |
|         |                                                                                        |   |
| Item 6. | Exhibits                                                                                    | 23     |

----

|                                                                                                                                |   | September 30,2010 |      |   | December 31,2009 |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|------------------|--------|
|                                                                                                                                |   | (unaudited)       |      |   |             |   |
| ASSETS                                                                                                                              |   |              |      |   |             |   |
| CURRENT ASSETS                                                                                                                      |   |              |      |   |             |   |
| Cash and cash equivalents                                                                                                           |   | $                 | 57,028    |   |             | $      | 117,542 |   |
| Restricted cash and cash equivalents                                                                                                |   |              | 54,929    |   |             |   | 13,732 |   |
| Accounts and interest receivable                                                                                                    |   |              | 722       |   |             |   | 5,037 |   |
| Accounts receivable—affiliate                                                                                                 |   |              | —   |   |             |   | 3,586 |   |
| Advances to affiliate                                                                                                               |   |              | 2,458     |   |             |   | 5,358 |   |
| Advances to affiliate—LNG inventory                                                                                           |   |              | —   |   |             |   | 1,319 |   |
| LNG inventory                                                                                                                       |   |              | 901       |   |             |   | 1,521 |   |
| Prepaid expenses and other                                                                                                          |   |              | 5,911     |   |             |   | 4,836 |   |
| TOTAL CURRENT ASSETS                                                                                                                |   |              | 121,949   |   |             |   | 152,931 |   |
|                                                                                                                                |   |              |      |   |             |   |   |   |
| NON-CURRENT RESTRICTED CASH AND CASH EQUIVALENTS                                                                                    |   |              | 82,394    |   |             |   | 82,394 |   |
| PROPERTY, PLANT AND EQUIPMENT, NET                                                                                                  |   |              | 1,559,573 |   |             |   | 1,588,557 |   |
| DEBT ISSUANCE COSTS, NET                                                                                                            |   |              | 23,108    |   |             |   | 26,953 |   |
| ADVANCES UNDER LONG-TERM CONTRACTS                                                                                                  |   |              | —   |   |             |   | 1,021 |   |
| OTHER                                                                                                                               |   |              | 9,972     |   |             |   | 7,617 |   |
| TOTAL ASSETS                                                                                                                        |   | $                 | 1,796,996 |   |             | $      | 1,859,473 |   |
|                                                                                                                                |   |              |      |   |             |   |   |   |
| LIABILITIES AND PARTNERS’ DEFICIT                                                                                             |   |              |      |   |             |   |   |   |
| CURRENT LIABILITIES                                                                                                                 |   |              |      |   |             |   |   |   |
| Accounts payable                                                                                                                    |   | $                 | 959       |   |             | $      | 39 |   |
| Accounts payable—affiliate                                                                                                    |   |              | 23        |   |             |   | 306 |   |
| Accrued liabilities                                                                                                                 |   |              | 58,793    |   |             |   | 22,181 |   |
| Accrued liabilities—affiliate                                                                                                 |   |              | 4,907     |   |             |   | 3,095 |   |
| Deferred revenue                                                                                                                    |   |              | 26,340    |   |             |   | 26,456 |   |
| Deferred revenue—affiliate                                                                                                    |   |              | 674       |   |             |   | 63,507 |   |
| TOTAL CURRENT LIABILITIES                                                                                                           |   |              | 91,696    |   |             |   | 115,584 |   |
|                                                                                                                                |   |              |      |   |             |   |   |   |
| LONG-TERM DEBT, NET OF DISCOUNT                                                                                                     |   |              | 2,111,921 |   |             |   | 2,110,101 |   |
| LONG-TERM DEBT—RELATED PARTY, NET OF DISCOUNT                                                                                 |   |              | 74,629    |   |             |   | 72,928 |   |
| DEFERRED REVENUE                                                                                                                    |   |              | 30,500    |   |             |   | 33,500 |   |
| DEFERRED REVENUE—AFFILIATE                                                                                                    |   |              | 9,813     |   |             |   | 7,360 |   |
| OTHER NON-CURRENT LIABILITIES                                                                                                       |   |              | 338       |   |             |   | 327 |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                       |   |              | —   |   |             |   | — |   |
|                                                                                                                                |   |              |      |   |             |   |   |   |
| PARTNERS’ DEFICIT                                                                                                             |   |              |      |   |             |   |   |   |
| Common unitholders (26,416,357 units issued and outstanding at September 30, 2010 and December 31, 2009)                       |   |              | (57,540   | )      |             |   | (41,494 | ) |
| Subordinated unitholders (135,383,831 units issued and outstanding at  September 30, 2010 and December 31, 2009)     |   |              | (451,723  | )      |             |   | (427,026 | ) |
| General partner interest (2% interest with 3,302,045 units issued and outstanding at September 30, 2010 and December 31, 2009) |   |              | (12,638   | )      |             |   | (11,807 | ) |
| TOTAL PARTNERS’ DEFICIT                                                                                                       |   |              | (521,901  | )      |             |   | (480,327 | ) |
|                                                                                                                                |   |              |      |   |             |   |   |   |
| TOTAL LIABILITIES AND PARTNERS’ DEFICIT                                                                                       |   | $                 | 1,796,996 |   |             | $      | 1,859,473 |   |

----

|                                                                                                                            |   | Three Months EndedSeptember 30, |    |   | Nine Months EndedSeptember 30, |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|--------|--------------------------------|--------|
|                                                                                                                            |   | 2010                            |    |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| REVENUES                                                                                                                        |   |                            |    |   |                           |   |   |   |   |   |   |   |
| Revenues                                                                                                                        |   | $                               | 65,945  |   |                           | $      | 65,035 |   |   | $ | 198,776 |   |   | $ | 97,112 |   |
| Revenues—affiliate                                                                                                        |   |                            | 672     |   |                           |   | 63,498 |   |   |   | 128,382 |   |   |   | 189,665 |   |
| TOTAL REVENUES                                                                                                                  |   |                            | 66,617  |   |                           |   | 128,533 |   |   |   | 327,158 |   |   |   | 286,777 |   |
|                                                                                                                            |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                                                                                        |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Operating and maintenance expense                                                                                               |   |                            | 5,865   |   |                           |   | 4,752 |   |   |   | 20,107 |   |   |   | 14,445 |   |
| Operating and maintenance expense—affiliate                                                                               |   |                            | 3,017   |   |                           |   | 2,810 |   |   |   | 9,167 |   |   |   | 8,393 |   |
| Depreciation expense                                                                                                            |   |                            | 10,538  |   |                           |   | 8,905 |   |   |   | 31,661 |   |   |   | 22,711 |   |
| Development expense                                                                                                             |   |                            | 4,012   |   |                           |   | — |   |   |   | 4,625 |   |   |   | — |   |
| Development expense—affiliate                                                                                             |   |                            | 615     |   |                           |   | — |   |   |   | 1,100 |   |   |   | — |   |
| General and administrative expense                                                                                              |   |                            | 1,245   |   |                           |   | 797 |   |   |   | 5,044 |   |   |   | 2,295 |   |
| General and administrative expense—affiliate                                                                              |   |                            | 4,951   |   |                           |   | 4,902 |   |   |   | 15,366 |   |   |   | 14,887 |   |
| TOTAL EXPENSES                                                                                                                  |   |                            | 30,243  |   |                           |   | 22,166 |   |   |   | 87,070 |   |   |   | 62,731 |   |
|                                                                                                                            |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS                                                                                                          |   |                            | 36,374  |   |                           |   | 106,367 |   |   |   | 240,088 |   |   |   | 224,046 |   |
| OTHER INCOME (EXPENSE)                                                                                                          |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                                                                                 |   |                            | 100     |   |                           |   | 65 |   |   |   | 245 |   |   |   | 883 |   |
| Interest expense, net                                                                                                           |   |                            | (43,451 | )      |                           |   | (38,089 | ) |   |   | (130,576 | ) |   |   | (104,370 | ) |
| Interest expense, net—affiliate                                                                                           |   |                            | — |   |                           |   | — |   |   |   | — |   |   |   | (13 | ) |
| Derivative gain, net                                                                                                            |   |                            | — |   |                           |   | 1,158 |   |   |   | 461 |   |   |   | 4,482 |   |
| Other                                                                                                                           |   |                            | — |   |                           |   | — |   |   |   | 1 |   |   |   | 12 |   |
| TOTAL OTHER EXPENSE                                                                                                             |   |                            | (43,351 | )      |                           |   | (36,866 | ) |   |   | (129,869 | ) |   |   | (99,006 | ) |
|                                                                                                                            |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                                                                                                               |   | $                               | (6,977  | )      |                           | $      | 69,501 |   |   | $ | 110,219 |   |   | $ | 125,040 |   |
|                                                                                                                            |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Allocation of net income (loss):                                                                                                |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Limited partners’ interest                                                                                                |   | $                               | (6,837  | )      |                           | $      | 68,111 |   |   | $ | 108,015 |   |   | $ | 122,539 |   |
| General partner’s interest                                                                                                |   |                            | (140    | )      |                           |   | 1,390 |   |   |   | 2,204 |   |   |   | 2,501 |   |
| Net income (loss) for partners                                                                                                  |   | $                               | (6,977  | )      |                           | $      | 69,501 |   |   | $ | 110,219 |   |   | $ | 125,040 |   |
|                                                                                                                            |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted net income (loss) per limited partner unit                                                                    |   | $                               | (0.04   | )      |                           | $      | 0.43 |   |   | $ | 0.67 |   |   | $ | 0.77 |   |
|                                                                                                                            |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of limited partner units outstanding used for basic and diluted net income (loss) per unit calculation: |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Common units                                                                                                                    |   |                            | 26,416  |   |                           |   | 26,416 |   |   |   | 26,416 |   |   |   | 26,416 |   |
| Subordinated units                                                                                                              |   |                            | 135,384 |   |                           |   | 135,384 |   |   |   | 135,384 |   |   |   | 135,384 |   |
| Total limited partners’ units                                                                                             |   |                            | 161,800 |   |                           |   | 161,800 |   |   |   | 161,800 |   |   |   | 161,800 |   |

----

|                              |   | CommonUnits |    |   | SubordinatedUnits |   |     | General PartnerUnits |   |   | Total   |   |
|-----------------------------------|--------|-------------|---------|--------|-------------------|--------|----------|----------------------|--------|--------|---------|--------|
| Balance at December 31, 2009 |   | $           | (41,494 | )      |              | $      | (427,026 | )                    |   | $      | (11,807 | )      |   | $ | (480,327 | ) |
| Net income                        |   |        | 17,634  |   |              |   | 90,380   |                 |   |   | 2,205   |   |   |   | 110,219 |   |
| Distributions                     |   |        | (33,680 | )      |              |   | (115,077 | )                    |   |   | (3,036  | )      |   |   | (151,793 | ) |
| Balance at September 30, 2010     |   | $           | (57,540 | )      |              | $      | (451,723 | )                    |   | $      | (12,638 | )      |   | $ | (521,901 | ) |

----

|                                                                              |   | Nine Months Ended |     |
|-----------------------------------------------------------------------------------|--------|-------------------|----------|
|                                                                              |   | September 30,     |     |
|                                                                              |   | 2010              |     |   | 2009 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                              |   |              |     |   |   |   |
| Net income                                                                        |   | $                 | 110,219  |   |   | $ | 125,040 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |              |     |   |   |   |   |   |
| Depreciation                                                                      |   |              | 31,661   |   |   |   | 22,711 |   |
| Non-cash derivative loss                                                          |   |              | 124      |   |   |   | 1,639 |   |
| Amortization of debt issuance costs                                               |   |              | 3,759    |   |   |   | 2,863 |   |
| Amortization of debt discount                                                     |   |              | 3,521    |   |   |   | 3,521 |   |
| Investment in restricted cash and cash equivalents                                |   |              | (41,197  | ) |   |   | (41,197 | ) |
| Changes in operating assets and liabilities:                                      |   |              |     |   |   |   |   |   |
| Accounts and interest receivable                                                  |   |              | 369      |   |   |   | 1,866 |   |
| Accounts receivable—affiliate                                               |   |              | 3,586    |   |   |   | 59 |   |
| Accounts payable and accrued liabilities                                          |   |              | 43,663   |   |   |   | 33,221 |   |
| Accounts payable and accrued liabilities—affiliate                          |   |              | 1,548    |   |   |   | 1,844 |   |
| Advances to affiliate                                                             |   |              | 2,900    |   |   |   | (4,458 | ) |
| Deferred revenue                                                                  |   |              | (3,116   | ) |   |   | 21,170 |   |
| Deferred revenue—affiliate                                                  |   |              | (62,833  | ) |   |   | — |   |
| Other                                                                             |   |              | 751      |   |   |   | 72 |   |
|  NET CASH PROVIDED BY OPERATING ACTIVITIES                                   |   |              | 94,955   |   |   |   | 168,351 |   |
|                                                                              |   |              |     |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                              |   |              |     |   |   |   |   |   |
| Use of restricted cash and cash equivalents                                       |   |              | —  |   |   |   | 189,665 |   |
| LNG receiving terminal construction-in-process, net                               |   |              | (3,636   | ) |   |   | (97,253 | ) |
| Advances under long-term contracts                                                |   |              | (36      | ) |   |   | (404 | ) |
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                               |   |              | (3,672   | ) |   |   | 92,008 |   |
|                                                                              |   |              |     |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                              |   |              |     |   |   |   |   |   |
| Distributions to unitholders                                                      |   |              | (151,793 | ) |   |   | (210,506 | ) |
| Affiliate payable                                                                 |   |              | (4       | ) |   |   | — |   |
| Borrowings from long-term debt—affiliate                                    |   |              | —  |   |   |   | 114 |   |
| Repayment of long-term debt—affiliate                                       |   |              | —  |   |   |   | (2,467 | ) |
| Debt issuance costs                                                               |   |              | —  |   |   |   | (23 | ) |
| Special rights adjustment                                                         |   |              | —  |   |   |   | (34,879 | ) |
| Use of restricted cash and cash equivalents                                       |   |              | —  |   |   |   | 109,008 |   |
| NET CASH USED IN FINANCING ACTIVITIES                                             |   |              | (151,797 | ) |   |   | (138,753 | ) |
|                                                                              |   |              |     |   |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              |   |              | (60,514  | ) |   |   | 121,606 |   |
| CASH AND CASH EQUIVALENTS—beginning of period                               |   |              | 117,542  |   |   |   | 7 |   |
| CASH AND CASH EQUIVALENTS—end of period                                     |   | $                 | 57,028   |   |   | $ | 121,613 |   |

----

----

|                                           |   | September 30,2010 |      |   | December 31,2009 |   |
|------------------------------------------------|--------|-------------------|-----------|--------|------------------|--------|
| LNG RECEIVING TERMINAL COSTS                   |   |              |      |   |             |   |
| LNG receiving terminal                         |   | $                 | 1,628,296 |   |             | $      | 1,627,564 |   |
| LNG receiving terminal construction-in-process |   |              | 1,837     |   |             |   | — |   |
| LNG site and related costs, net                |   |              | 171       |   |             |   | 176 |   |
| Accumulated depreciation                       |   |              | (71,243   | )      |             |   | (39,975 | ) |
| Total LNG receiving terminal costs, net        |   |              | 1,559,061 |   |             |   | 1,587,765 |   |
| FIXED ASSETS                                   |   |              |      |   |             |   |   |   |
| Computers and office equipment                 |   |              | 227       |   |             |   | 259 |   |
| Vehicles                                       |   |              | 383       |   |             |   | 421 |   |
| Machinery and equipment                        |   |              | 955       |   |             |   | 931 |   |
| Other                                          |   |              | 482       |   |             |   | 419 |   |
| Accumulated depreciation                       |   |              | (1,535    | )      |             |   | (1,238 | ) |
| Total fixed assets, net                        |   |              | 512       |   |             |   | 792 |   |
|                                           |   |              |      |   |             |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT, NET             |   | $                 | 1,559,573 |   |             | $      | 1,588,557 |   |

|                                                    |   | September 30,2010 |   |   | December 31,2009 |   |
|---------------------------------------------------------|--------|-------------------|--------|--------|------------------|--------|
| Interest expense and related debt fees                  |   | $                 | 54,929 |   |             | $      | 14,152 |   |
| LNG receiving terminal construction and operating costs |   |              | 2,035  |   |             |   | 7,850 |   |
| Affiliate                                               |   |              | 4,907  |   |             |   | 3,095 |   |
| Other                                                   |   |              | 1,829  |   |             |   | 179 |   |
| Total accrued liabilities                               |   | $                 | 63,700 |   |             | $      | 25,276 |   |

----

|                                              |   | September 30,2010 |      |   | December 31,2009 |   |
|---------------------------------------------------|--------|-------------------|-----------|--------|------------------|--------|
| Senior Notes, net of discount                     |   | $                 | 2,111,921 |   |             | $      | 2,110,101 |   |
| Senior Notes, net of discount—related party |   |              | 74,629    |   |             |   | 72,928 |   |
| Total long-term debt, net of discount             |   | $                 | 2,186,550 |   |             | $      | 2,183,029 |   |

----

|                            | September 30,2010 |   | December 31,2009     |
|---------------------------------|-------------------|--------|----------------------|
|                            | Carrying Amount   |   | Estimated Fair Value |   | Carrying Amount |   | Estimated Fair Value |
| 2013 Notes (1)                  | $            |   | 550,000              |   | $  |   | 530,750 |   | $  |   | 550,000 |   | $  |   | 503,250 |
| 2016 Notes, net of discount (1) |              |   | 1,636,550            |   |   |   | 1,493,352 |   |   |   | 1,633,029 |   |   |   | 1,371,744 |

----

----

----

----

|                                                                                | Nine Months EndedSeptember 30, |   |
|-------------------------------------------------------------------------------------|--------------------------------|--------|
|                                                                                | 2010                           |   | 2009 |   |
| Cash paid for interest, net of amounts capitalized                                  | $                         |   | 82,340 |   | $  |   | 56,767 |   |
| Construction-in-process and debt issuance additions funded with accrued liabilities |                           |   | — |   |   |   | 7,916 |   |

----

| Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|--------------|---------------------------------------------------------------------------------------------|

| ·   | statements regarding our ability to pay distributions to our unitholders; |
|--------------------|---------------------------------------------------------------------------|

| ·   | our expected receipt of cash distributions from Sabine Pass LNG, L.P. (“Sabine Pass LNG”); |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | statements regarding future levels of domestic natural gas production, supply or consumption; future levels of liquefied natural gas (“LNG”) imports into North America; sales of natural gas in North America; exports of natural gas from North America; and the transportation, other infrastructure or prices related to natural gas, LNG or other energy sources; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | statements regarding any financing transactions or arrangements, or ability to enter into such transactions or arrangements; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| ·   | statements regarding any terminal use agreement (“TUA”) or other agreements to be entered into or performed substantially in the future, including any cash distributions and revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification, liquefaction or storage capacity that are, or may become, subject to TUAs or other contracts; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | statements regarding counterparties to our TUAs, construction contracts and other contracts; |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | statements relating to the construction or operation of our proposed liquefaction facilities, including statements concerning the completion or expansion thereof by certain dates or at all, the costs related thereto and certain characteristics thereof; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | statements regarding any business strategy, any business plans or any other plans, forecasts, projections or objectives, any or all of which are subject to change; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | statements regarding legislative, governmental, regulatory, administrative or other public body actions, requirements, permits, investigations, proceedings or decisions; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

| ·   | Overview of Business |
|--------------------|----------------------|

| ·   | Overview of Significant 2010 Events |
|--------------------|-------------------------------------|

| ·   | Liquidity and Capital Resources |
|--------------------|---------------------------------|

| ·   | Results of Operations |
|--------------------|-----------------------|

| ·   | Off-Balance Sheet Arrangements |
|--------------------|--------------------------------|

| ·   | Summary of Critical Accounting Policies and Estimates |
|--------------------|-------------------------------------------------------|

| ·   | Recent Accounting Standards |
|--------------------|-----------------------------|

| ·   | In June 2010, we initiated a project to add liquefaction services at the Sabine Pass LNG receiving terminal that would transform the terminal into a bi-directional facility capable of liquefying natural gas and exporting LNG in addition to importing and regasifying foreign-sourced LNG. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | In June 2010, Cheniere Marketing assigned its TUA with Sabine Pass LNG to Investments and concurrently entered into a VCRA with Investments. Under the terms of the new VCRA, which became effective July 1, 2010, Cheniere Marketing will continue to be responsible for monetizing the capacity at the Sabine Pass LNG receiving terminal and will have the right to utilize all of the services and other rights at the Sabine Pass LNG receiving terminal available under the TUA assigned to Investments. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In September 2010, Sabine Pass Liquefaction, LLC, a subsidiary, received approval from the U.S. Department of Energy to export 16.0 million tonnes per annum ("mtpa") of LNG, equivalent to approximately 2 billion cubic feet per day (“Bcf/d”), produced from domestic natural gas over a thirty year period starting not later than September 2020. This license authorizes Sabine Pass Liquefaction, LLC to export LNG to purchasers in countries which have a free trade agreement with the United States. A second application to expand the authorization granted in the first license to all World Trade Organization member countries, and to any other country with which the U.S. may conduct trade, has been filed and is in a 60-day public comment period which ends on December 13, 2010. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Total has reserved approximately 1.0 Bcf/d of regasification capacity and has agreed to make monthly capacity payments to Sabine Pass LNG aggregating approximately $125 million per year for 20 years that commenced on April 1, 2009. Total, S.A. has guaranteed Total’s obligations under its TUA up to $2.5 billion, subject to certain exceptions; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Chevron has reserved approximately 1.0 Bcf/d of regasification capacity and has agreed to make monthly capacity payments to Sabine Pass LNG aggregating approximately $125 million per year for 20 years that commenced on July 1, 2009. Chevron Corporation has guaranteed Chevron’s obligations under its TUA up to 80% of the fees payable by Chevron. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                 |   | Nine Months EndedSeptember 30, |     |
|------------------------------------------------------|--------|--------------------------------|----------|
|                                                 |   |      2010  |     |   |       2009 |   |
| SOURCES OF CASH AND CASH EQUIVALENTS                 |   |                           |     |   |   |   |
| Operating cash flow                                  |   | $                              | 94,955   |   |   | $ | 168,351 |   |
| Use of restricted cash and cash equivalents          |   |                           | —  |   |   |   | 298,673 |   |
| Borrowings under long-term note—affiliate      |   |                           | —  |   |   |   | 114 |   |
| Total sources of cash and cash equivalents           |   |                           | 94,955   |   |   |   | 467,138 |   |
|                                                 |   |                           |     |   |   |   |   |   |
| USES OF CASH AND CASH EQUIVALENTS                    |   |                           |     |   |   |   |   |   |
| Distributions to unitholders                         |   |                           | (151,793 | ) |   |   | (210,506 | ) |
| Special rights adjustment                            |   |                           | —  |   |   |   | (34,879 | ) |
| LNG receiving terminal construction-in-process, net  |   |                           | (3,636   | ) |   |   | (97,253 | ) |
| Repayment of long-term debt—affiliate          |   |                           | —  |   |   |   | (2,467 | ) |
| Other                                                |   |                           | (40      | ) |   |   | (427 | ) |
| Total uses of cash and cash equivalents              |   |                           | (155,469 | ) |   |   | (345,532 | ) |
|                                                 |   |                           |     |   |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |   |                           | (60,514  | ) |   |   | 121,606 |   |
| CASH AND CASH EQUIVALENTS—beginning of period  |   |                           | 117,542  |   |   |   | 7 |   |
| CASH AND CASH EQUIVALENTS—end of period        |   | $                              | 57,028   |   |   | $ | 121,613 |   |

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|              |   |                                |   |                  |   |   | Total Distribution (in thousands) |   |
|-------------------|--------|-------------------------------------|--------|-----------------------|--------|--------|-----------------------------------|--------|
| Date Paid         |   | Period Covered by Distribution      |   | Distribution Per Unit |   |   | Common and General Partner Units  |   |   | Subordinated Units |   |
| February 12, 2010 |   | October 1 – December 31, 2009 |   | $                     | 0.425  |   |                              | $      | 12,630 |   |   | $ | 57,538 |   |
| May 14, 2010      |   | January 1 – March 31, 2010    |   | $                     | 0.425  |   |                              | $      | 12,630 |   |   | $ | 57,538 |   |
| August 13, 2010   |   | April 1 – June 30, 2010       |   | $                     | 0.425  |   |                              | $      | 11,456 |   |   | $ | — |   |

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| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
|--------------|------------------------------------------------------------|

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| Item 4. | Disclosure Controls and Procedures |
|--------------|------------------------------------|

| Item 1. | Legal Proceedings |
|--------------|-------------------|

| Item 6. | Exhibits |
|--------------|----------|

| 31.1*  | Certification by Chief Executive Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                        |
| 31.2*  | Certification by Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act                                                    |
|   |                                                                                                                                                        |
| 32.1** | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|   |                                                                                                                                                        |
| 32.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|   |                                                                                                                                                        |

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| CHENIERE ENERGY PARTNERS, L.P. |
|--------------------------------|
|                           |   |
| By:                            | Cheniere Energy Partners GP, LLC,its general partner |
|                           |   |
| By:                            | /s/    Jerry D. Smith |
|                           | Jerry D. SmithChief Accounting Officer (on behalf of the registrant and as principal accounting officer) |
|                           |   |
| Date:                          | November 4, 2010 |
|                           |   |

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