Lower 48 LNG export pioneer Charif Souki is planning a third natural gas venture that will include an E&P team, he told Hart Energy’s DUG Gas Conference & Expo attendees in Shreveport, Louisiana.

Since emerging from a non-compete in late December with his most recent venture, Tellurian Inc., he said he’s been putting his “team back together.”

“Definitely [it will include an E&P team] because I still believe in the integrated solution for exporting natural gas from the United States. If you do it separately, it's more complicated. It’s important to have the ability to have the resource, produce it yourself, deliver it to a facility and put it on the water.

“Instead of getting Henry Hub prices, you get global prices,” Souki said.

Souki’s first LNG venture, Cheniere Energy, was initially built as an LNG importer during the aughts. At the time, North America appeared it would become short natural gas as conventional-rock formations’ output was in decline.

In the same decade, however, U.S. producers were perfecting a recipe for surfacing gas from super-tight rock shale formations. By 2012, U.S. gas prices collapsed under the weight of a supply wave of new Tcf's .

Cheniere added LNG export to the Louisiana property, which is at the Texas border at the mouth of the Sabine River.

Meanwhile, Souki started another LNG export venture, Tellurian Inc., which he left in late 2023 before its sale to Woodside Energy for $1.2 billion in cash and debt assumption.

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The newest venture will likely be in the U.S., he told conference attendees March 20, rather than, for example, Australia.

But “it is too soon to tell. I'm still working on what the different options are.”

It will be natural gas, though.

“I would stay with natural gas. It is what I know. I’ve spent 30 years of my life doing it. I’m too old to start learning something new,” he said.

And global demand for natural gas won’t decline. Too much LNG on the global market “doesn’t exist,” Souki said.

“Think about it. What is natural gas used for? The first and most important factor is making fertilizers. If you don't have natural gas, you don't eat.”

$1,200 a ton, plus tariffs

The Cheniere plant’s initial investment economics were based on a construction cost of $600 per metric ton/year.

Investors are overlooking today what newbuild LNG export facilities really cost now, Souki said, and President Trump’s on-and-off tariff orders are also in play.

“You are not going to get away with anything under $1,000 a ton and more likely $1,200 a ton today in terms of constructing any LNG facilities,” he said.

That would be for the first two trains. “You start getting economies of scale by the third train.”

The Venture Global news recently that its Plaquemines project will cost more than expected resulted in the stock falling 50% below its January IPO offering at $24 per share.

“The costs are catching up with everybody right now. Finally, people are starting to become real about what it really costs.”

Meanwhile, Trump imposed a 25% tariff on goods from China.

“We don't really know what steel is going to cost us,” Souki said. “So I would say right now it would be very, very difficult to get a project wrapped today.”

‘Permits will be there’

The tariffs won’t affect projects already underway, though, he added. Those are “going to continue.”

President Biden suspended new permits for LNG export projects in January of 2024.

Souki said the next generation of projects that pull permits will be focused on cost and not about permits.

“The permits will be there. We've been successful in getting permits through Democrats and Republicans. At the end of the day, you can't walk away from the attraction.

“Cheniere Energy is now the largest American exporter of anything that makes a difference. You have one company now … responsible for $25 billion of foreign exchange.

“So there's a compelling argument, regardless of who you are—whether you are a Democrat or Republican—you're not going to walk away from an industry that creates foreign currency.”

U.S. LNG exporters currently draw some 15.5 Bcf/d of gas feedstock for their plants on the Texas and Louisiana Gulf coasts.

That will roughly double in the coming seven years upon completion of new plants and trains already underway, he noted.

“That is going to more than double the liquefaction capacity of the country,” Souki said. “All of this is already in the books [by] people who put some very serious money into the process, and they’re not likely to walk away from it.”

The fear is gone

Meanwhile, how LNG buyers procure supply has changed since the Cheniere export trains were built in the past decade, he said.

With some exceptions, long-term contracts for firm supply are less interesting to buyers.

A decade ago, “if you didn’t have the molecules, you couldn’t heat your constituents' [homes] or you couldn’t turn the lights on. So there was an urgency on getting a long-term contract because you had to secure the molecule,” he said.

“The price didn’t matter.”

Since then, new loads from Australia followed by loads from the U.S. have made global LNG trading “a very liquid market.”

“It's 400 million tons [per year] today,” Souki said.

“So it means 20 cargos for sale every day. There are 400 to 500 ships full of LNG on the water at any given time. That's about 1.5 Tcf of floating storage.”

It’s LNG on demand.

“Somebody who needs natural gas in a hurry can just make a phone call and offer 50 cents more for that particular cargo and he will get it. So there's no fear of not having the molecules anymore.”

A utility executive is “perfectly happy to pay a little bit more for a specific cargo rather than get committed for a long-term contract where he can be seriously hurt if it goes in the other direction.”

Europe, Russia, U.S.

EU members’ gas-storage tanks fell below norms during this past winter. The EU warned those that had faltered but didn’t exhibit panic.

Souki said EU buyers “would rather all be stupid at the same time than be right alone—because if they’re right alone … nobody says ‘Thank you.’ If they’re stupid alone, they get fired.”

The view from Europe currently is that the U.S. under the new administration is unreliable.

“But that's always the case,” he added. “It's nothing new. We've always looked unreliable.”

Meanwhile, Europe had shown itself to be unreliable as well, he said. “They've never really been willing to make any serious commitment to secure their energy sources.”

Souki joined former Energy Secretary Rick Perry in Brussels “to talk to them about what I saw as something that was coming where Europe was going to be in a very difficult situation.”

This was before Russia invaded Ukraine, which resulted in EU members disconnecting from Russia’s pipelines of gas, oil and electricity.

“I told them, you have three options,” Souki said.

The first option was to “do nothing and get ready to pay a very expensive price for your natural gas.”

The second was to manage gas-storage tanks “more intelligently. Don't let it empty out too much. Fill it when you have to. Put a mandate on your companies to fill it in the summer when you actually have it available instead of letting it be empty by the fall.”

The third option was to participate in and secure gas supply from U.S. LNG export projects.

“Of course, the third one was way too complicated for them,” he said.

The post-invasion cost of LNG delivered to Europe in 2022 soared to as much as $80/MMBtu.

“It's their fault,” Souki said. “They should have seen it coming. But they were so comfortable with the idea that ‘we can get Russian gas forever and very cheap.’

“That didn't work out that way.”

Will they ever turn back to Russia? “Yes,” Souki said.

Soon? “When it becomes necessary. I have absolutely no doubt that when the economic necessity materializes and they have to swallow their pride and swallow their fear and start importing Russian gas [they will].”

Energy Secretary Chris Wright

Souki said he is excited to work with new U.S. Energy Secretary Chris Wright. Wright participated in frac-mapping the turn-of-the-century horizontal wildcats that were part of proving U.S. shale gas could be produced economically.

Wright went on to build Top 3 pressure-pumping firm Liberty Energy.

“It's very nice that we now have an energy secretary who understands what we are doing and who is in favor of that,” Souki said.

“Frankly, I'm dumbfounded by the incompetence of the last four years. I've never seen it before. Democrats or Republicans, energy secretaries were always very smart. They knew the business really well,” he added.

But the “last four years were an exception.

“So it’s nice to be back on grounds where you can have an intelligent conversation with somebody [at the Energy Secretary’s office].”

Meanwhile, Interior Secretary Doug Burgum, who was governor of the Bakken oil play’s North Dakota, has said a gas pipeline from the Marcellus gas play in Pennsylvania into New England will be built under the Trump administration.

Will this happen?

Souki said, “I don’t know. I would have to get in the head of the president.”

But “if it’s important to him, then he would get it done.”

But it makes sense, though, he said.

“Is it something that the residents of New England should be concerned about? Yes, absolutely. It's their problem. They're the ones paying a lot more for their heating and their electricity.”

Natural gas, including from Russia, is imported at an LNG regasification facility near Boston to supplement supply in New England.

“There are a lot of things that make no sense at all,” Souki said. “We have plenty of gas in the Marcellus. We can get it to the north very, very easily and very, very cheaply.

“But then if you live in New England, you have your choices to make.”

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