'Very, Very Active' Discussions Under Way for US LNG Supply

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US LNG exporters are seeing renewed interest in their projects as global buyers, pressured by the energy crisis in Europe, scramble to secure supply for the future.

Michael Smith, CEO of the Freeport LNG facility in Texas, described “very, very active” discussions with a large number of potential customers for its planned Train 4 expansion.

“The tone of the conversations, and the pricing, has changed in the last week,” Smith told reporters at the CERAWeek by S&P Global conference on Wednesday.

Smith is targeting a final investment decision (FID) on the 5 million ton per year (685 million cubic feet per day) train by the end of this year, or early next year, with service starting in 2026 or 2027.

Smith's remarks came on the same day Cheniere Energy announced an expanded deal with French offtaker Engie for more supply from its Corpus Christi LNG facility in Texas. The original deal went into effect last year and had a term of 11 years and was expected to move the company’s Stage 3 expansion closer to FID. The expanded deal has a 20-year term.

Tellurian Bellwether

“Yeah, there's a lot of activity. It's great. Michael [Smith] was right. But what is the activity going to lead to? You’ve got to be realistic,” said Octavio Simoes, president and CEO of Tellurian, with reference to short-term LNG, which his company cannot yet do.

“Buyers are now having buyer's remorse, because they had the opportunity five years ago for getting into sponsoring projects to give them energy security," he added.

Tellurian is pursuing the 27 million ton/yr (3.7 billion cubic feet per day) Driftwood LNG project in Louisiana and plans to start construction on the first 10 million tons next month.

Tellurian Chairman Charif Souki told reporters the invasion had put the global energy shortage in “high visibility" — "things are going, unfortunately for the wrong reason, pretty well for us.”

When asked if the company would accelerate subsequent phases, Souki said it was too soon to tell.

“Given the disparity in prices between the US and [the rest of the] world, what makes the most sense is to finish Phase 1, and then use the cash flow from Phase 1 to pay for Phase 2, 3 and 4,” he told reporters. “That is our current default position. Now, if we found a way to accelerate this, we certainly would take a look at it.”

Green LNG Still in Focus

The LNG market has evolved over the past few years as buyers have demanded lower-carbon supplies. Companies including Cheniere and Freeport have unveiled a number of low-carbon initiatives to attract buyers, but Smith said on Tuesday that customers are currently more focused on having secure supplies.

“The No. 1 factor in the last week is getting a hold of it,” he said. However, he noted that the company’s facility is the only one in the US with electric drives, making it favorable from an environmental standpoint. The company has also formed a carbon capture partnership with Gulf of Mexico producer Talos Energy.

Meanwhile, Cheniere CEO Jack Fusco also said its green credentials were a main factor in the Engie deal.

“One of the reasons that they [wanted] to increase their position and become a foundation customer for us on Stage 3 was that they like that we're leading the charge, as far as climate,” he said.

Hurdles Remain

But will US regulators keep up with the new wartime environment?

"In terms of expediting, we are trying to move this forward as quickly as possible," Richard Glick, chairman of the US Federal Energy Regulatory Commission, said at the conference.

"But as I said before, when you don't do the analysis that you're supposed to do, the courts will send it back to us anyway. So we're trying to make sure that the analysis is done. It's done right. But yet, we always try to expedite to the extent we can expedite a project. Whether it be a hydroproject, pipeline project, LNG project, we try to expedite as quickly as we can given the constraints of the law that we operate under."

Glick cited 18 permitted LNG projects, only nine of which are operating.

“That’s something I think we need to take a look at. Why are those other nine not built yet?" he said, adding that many projects have not started site work even though they are fully permitted.

"I don't think there's anything in terms of our immediate agenda that would actually help produce more energy, but we are talking to them about how we can improve our siting processes," he added.

LNG Supply, Liquefaction, LNG Contracts, LNG Projects
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