Tellurian's Souki Calls for More European Investment in US LNG

When it comes to US LNG export projects, it is not about the duration of supply deals, but much more about investment in the upstream and infrastructure side, said Charif Souki, executive chairman at US LNG firm Tellurian at this year’s Energy Intelligence Forum in London.

The global LNG market is a liquid market, with “400 ships full of LNG on the water at any given time,” he said, but if Europe wants to control this resource, more investments are needed in projects, which are most likely to happen in the US and Qatar.

“Europe is spending next winter $5 to $6 billion in subsidies to their consumers. For a fraction of that price, we could secure long-term gas reserves from the United States at cost,” said Souki, adding that there must be political will to do this, which he has not seen so far.

“At the moment is all talk, very little action," he told the audience.

But No More Cheap Gas

Although there is around 100 million tons of liquefaction projects in the US that have already been permitted, they have not been able to obtain financing because “the business model is broken for a number of reasons,” Souki said.

He argued that people have still not accepted the significant price inflation on the upstream and infrastructure side.

“Because of that, dreaming about the days when you could get [US] gas on the water for $4-$5 is something of the past,” stated Souki, adding that in order to justify an investment in natural gas plus liquefaction, “we have to think in terms of $10-$12."

Use It or Lose It

With regards to Tellurian’s 27 million ton/yr Driftwood LNG, Souki believes the company has finally found the right business model for the project, though the long awaited project is still facing headwinds following a failed financing attempt last week.

He admitted that attracting the necessary capital has been a rather difficult task, as just a year ago global energy companies, even the majors, were lacking capital, and were cutting back on dividends.

However, in the previous quarter most of these firms posted record profits, which for the first time in a decade are allowing these extremely liquid energy companies to make investments and “in fact are under pressure by their respective governments to make these investments.”

Nonetheless, with governments now imposing windfall taxes on energy firms, the situation has turned into “you either make investment or we take the money away from you,” said Souki.

He added that wrong investments during the last decade put energy companies in a negative light and popularized criticism of these firms.