By the end of the decade, Cheniere Energy Inc. expects to have 11.4 Bcf/d of liquefied natural gas (LNG) regasification capacity available along the Gulf Coast, with four deepwater ports, seven unloading docks and 15 storage tanks able to hold 51.7 Bcfe, CEO Charif Souki said Tuesday. However, the Houston-based company has a few issues causing some concern, including its ability to hire a capable workforce.
Speaking at the Bank of America Energy Conference in Boca Raton, FL, Souki said Cheniere has faced few regulatory hurdles in its quest to become one of the leading LNG regasification businesses in the country. Obtaining permits for new receiving facilities from the Federal Energy Regulatory Commission, in fact, has been only a small concern. When FERC has permitting issues, Cheniere provides the answers or makes the corrections.
"That really has been the easiest part of the program," he said. "It's been very transparent. FERC, just like us, decided to work on a model. We are learning together." If there are issues, "we fix it and we move on." However, a more daunting dilemma has been Cheniere's ability to expand to meet its growing workload.
"It's not easy to hire enough people to put this program in place," Souki said. "It's an overwhelming concern. It's easy to lay out the strategy and execution on a piece of paper, but implementing it is a lot of work." To ensure there are enough employees to handle the workload, Cheniere has "committed to not do a new project until it's comfortable with existing projects."
Cheniere management also faces other "considerations," he said, including the U.S. market's capacity to absorb increases in LNG deliveries, optimizing alternative commercial models and how the financing decisions impact the timing of cash flow receipts. Souki said all of the project and pipeline construction is on the front end, which takes the money, before the flow of gas and dependable revenue -- which is still a few years down the road.
The company has four LNG projects underway along the Gulf Coast, and by 2011, it is projected to have 11.4 Bcf/d available from the regasification facilities. The Freeport, TX facility is expected to be ready to receive 1.5 Bcf/d by 2008. The Sabine Pass, LA project, with construction quickly moving along, is expected to be ready to receive 2.6 Bcf/d by 2008, with an increase to 4 Bcf/d by 2009. The Corpus Christi, TX facility should have 2.6 Bcf/d available by 2010, and the newest project, the Creole Trail, LA facility, will have 3.3 Bcf/d available by 2010.
Souki noted world LNG consumption in 2004 was 17 Bcf/d. Liquefaction in 2010 is estimated to be 41 Bcf/d, offering 15-16 Bcf/d of swing capacity for U.S. markets. "I think there will be enough capacity, but not necessarily too much. It depends on the utilization rate."
Changes are expected in how LNG transactions are financed between operators and users.
"Financing won't be an issue any longer if the resource [LNG] is controlled, and the market is accessible," he said. He also expects to eventually see Henry Hub pricing for LNG, with the New York Mercantile Exchange "increasingly the benchmark for the price globally...both for short-term and long-term portfolios." Also, the "trend is increasingly toward transactions between the owners and the users. By the way, it's the business model used around the world. It's only in America where the business model [for LNG] hasn't been worked out yet."
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