Ex-Cheniere boss Souki: LNG industry is “extremely volatile”

Trends for liquefied natural gas (LNG) exports are becoming much more difficult to predict in long-term as the market is changing on a monthly basis, according to Charif Souki, the former head and founder of U.S. LNG export player Cheniere Energy.

“We live in a very seasonal industry – very volatile industry, where the weather has more impact on demand than anything else,” Souki said on Wednesday at a press conference held as part of the CERAWeek by IHS Markit currently being held in Houston.

There are predictions that an oversupply of LNG could last through the early part of next decade, but this does not mean that the “oversupply would not change to shortage” prior to that, as more and more nations are choosing to import the chilled fuel, Souki said.

“I have never met anybody, including myself, who is able to project five years or more in the future… All I know about this business is that is extremely volatile and you have to make long-term decisions based on short-term realities.”

Souki, currently the chairman of Tellurian Inc, which recently received approval to export LNG to free-trade agreement countries from its Driftwood project in Louisiana, is one of the LNG industry’s most famous executives.

He was ousted from Cheniere at the end of 2015 due to its ambitions to keep expanding the business. Billionaire investor and a major Cheniere Energy shareholder, Carl Icahn confirmed last year he was the reason and the driving force behind the ousting of Souki.

Houston-based Cheniere became the first US exporter of LNG produced from shale gas when it launched its initial cargo from the Sabine Pass liquefaction plant in February 2016.

However, the industry has undergone many changes in the last two years due to the oil and gas downturn with LNG prices falling significantly.

According to Souki, in the current market “prices are changing radically from one area to the other, but not always at the same time, and this is what the world is going to have to get used to.”

Because of the weather and seasonality, premium prices move from Asia to southern Europe and to the Middle East.

“You have prices that vary on a regional basis from $5-5.5 per MMBtu to $9-10 per MMBtu,” Souki said.

Tellurian LNG plans

Tellurian was formed in February last year by Souki and Martin Houston, former COO of BG Group, now owned by Shell.

The company started with a group of 10 people and since then “we have grown to a group of 65 people,” Souki said, adding that the company’s Driftwood LNG project keeps them “extremely busy.”

The company proposes to build a 26 million tons per year LNG export facility near Lake Charles, Louisiana in the US Gulf Coast. Tellurian expects to begin construction of Driftwood LNG in 2018 and deliver first chilled gas in 2022.

“We’re very confident we’re going to find buyers for our gas. I absolutely have no doubt the global gas market is going to continue to grow,” Souki said.

“It seems we have a couple of decades of ample gas supply in the U.S. at very cheap rates, so I like our position.”

Tellurian had not yet started its marketing activities for the LNG export project as it is still assessing what would be the costs of sourcing the gas to the liquefaction facility.

“Once we have that, we are going to know what prices we will be able to offer to our customers,” Souki said adding that Tellurian would officially start talking with potential customers at the Gastech conference in Tokyo to be held in April.

By Mirza Duran