Cheniere eyes LNG industry growth after 1,000th cargo

By Sergio Chapa, Staff writer

Published

6:00 pm CST, Sunday, February 2, 2020

CAMERON, Louisiana — With this week’s LNG export milestone placing Houston’s Cheniere Energy among industry elites, it has no intention of relinquishing its dominant lead in U.S. shipments.

The company shipped its 1,000th cargo of liquefied natural gas Monday from its Corpus Christi terminal just four years after it exported the first from the continental U.S. — a cargo from its Sabine Pass terminal in Louisiana.

With the milestone behind it, the company sees further growth opportunities in China after U.S. and Chinese officials signed a tentative trade deal this month. It also is developing more flexible business models that include partnerships with natural-gas producers in the Permian Basin of West Texas.

“We just feel like we’re now just getting started,” Cheniere Energy CEO Jack Fusco said. “This validates that we’re the real deal. We’re now a force to reckon with.”

Milestone: Cheniere Energy’s 1,000th LNG cargo headed to France

The milestone shipment puts Cheniere among global LNG exporters such as Qatargas, Total, Petronas, Chevron, Shell and BP whose exports number in the thousands. Through the first 11 months of 2019 alone, Cheniere had exported 400 shipments while its nearest competitor had 65.

Cheniere’s rise comes as global demand for liquefied natural gas is growing and four competing export terminals have come online in the U.S., where horizontal drilling and hydraulic fracturing have created a record surplus of natural gas that needs to be exported.

When the company started exporting, global demand for liquefied natural gas was at 270 million tons per year. That demand now stands at 380 million tons and is expected to grow to 500 million tons by 2030 — with the greatest growth in China, which is converting more power plants to natural gas from coal.

The trade war between the United States and China, however, sent LNG exports to that nation plunging from 26 in 2018 to just three in 2019. Two of those shipments came from Cheniere’s Sabine Pass terminal and one came from Corpus Christi plant.

But LNG is at the top of the list of U.S. commodities that will be headed to China after the U.S. and China signed an initial trade deal Jan. 15. The pact does not require congressional approval.

Cheniere already had an LNG supply deal with China National Petroleum Corp. when trade tensions began but the company’s Beijing office was reported to be in talks with other buyers.

“China has surpassed Japan and Korea,” Fusco said. “They’re the No. 1 importer of LNG. Their LNG import capabilities — even during trade tensions — grew over 10 percent last year. It’s forecast continues to be over 10 percent this year … and can be much greater than that if they want it to be.”

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Cheniere makes most of its money from the fees it charges for liquefying natural gas and shipping it to customers around the world. The company in 2018 reported a $471 million profit and revenue of $8 billion.

As the largest buyer of natural gas in the United States, Cheniere purchases an average of 6 billion cubic feet of natural gas per day from more than 70 producers. Fusco says he expects that number to grow.

“We’re buying close to 10 percent of U.S. natural gas production every day,” Fusco said. “Domestic production is around 70 billion cubic feet per day right now. We’re taking about 6 billion. But that’s going to grow when we bring more two trains online. It is probably going to be least 7.5 billion.”

Although the company’s earlier business model relied on long-term supply deals with overseas utility companies, Cheniere has since changed things up.

In September, Cheniere announced long-term partnerships with Houston oil companies EOG Resources and Apache Corp. Under the deals, Cheniere buys gas from the two companies at Permian well-head prices, sells the LNG at market price and gives the difference to EOG and Apache. Cheniere profits from its processing and shipping fees.

The deal provides an outlet for the vast amount of natural gas produced in the Permian, the excess of which is typically burned off in a process known as flaring.

Cheniere is one of several companies sending much of the Permian’s natural gas through hundreds of miles of new pipelines to Corpus Christi, a major hub for the natural gas business.

“Cheniere epitomizes the type of blue-chip customer the Port of Corpus Christi values,” Port of Corpus Christi CEO Sean Strawbridge said. “Cheniere’s Corpus Christi liquefication LNG exports continue to balance the burgeoning national trade deficit and provide a cleaner, reliable fuel source to major markets throughout the globe.”