Europe to Face ‘Miserable’ Winter, Tellurian’s Souki Says

LONDON—Europe is eying a “miserable winter” much to its own fault for relying almost exclusively on Russian gas, Tellurian Executive Chairman Charif Souki told attendees at the Energy Intelligence (EI) Forum.

“There’s nothing you can do tomorrow. We’re going to have a miserable winter in Europe. And if it’s cold, we’re going to have an even more miserable winter,” Souki said.

Europe is arguably expected to experience two difficult winters this year and next, according to reports from BBC, citing U.K. energy pundits. Such a scenario will require bold decisions to deal with the problem.

“And now it seems that the energy policy of Europe is to pray for a warm winter, it is not a very solid energy policy,” Souki added, urging Europe to invest in U.S. liquefaction projects to assure future supply while also dodging a question about the future of Tellurian’s Driftwood project.

“Now it seems that the energy policy of Europe is to pray for a warm winter, it is not a very solid energy policy.”—Charif Souki, Tellurian Inc.

The Tellurian head pointed the blame on Europe’s choice to rely only on natural gas from Russia for the energy crisis facing the continent, which he said was “not a very national policy.”

China, he argued, despite its tensions with the U.S. continues to diversify its supply sources. About 40% of the deals signed over the last 12 months for U.S. LNG volumes came from Chinese companies.

The long-term LNG sector executive said Europe still has an opportunity to invest in the sector, he said citing the numerous liquefaction projects in the U.S. that are permitted but have yet to obtain financing because of a “broken business model.”

“So today, if you want to count on energy from the United States, you have to think in terms of $10 to $$12 on the water as the minimum that you’re going to have,” Souki said.

Investments Needed

Annual upstream investments up to $250 billion are potentially needed for the foreseeable future to produce energy to fulfill growing demand. Souki believes better efforts are needed to convince people to make these investments.

“If you want to convince these people to make an investment, one, you cannot tell them that their commodity is going to be in short demand only for a decade or only for five years, and two, you have to work in a cooperative manner with them in order to understand what is happening,” he said.

To the contrary, the liquidity sources in the Middle East will start to flow to two primary markets: Africa and Asia, he added.

The end result is what Souki described as a tale of two different markets with the West dealing with itself and the Middle East increasingly seeking additional markets.

MORE COVERAGE OF Energy Intelligence Forum 2022:

Europe’s Winter is Coming But Can LNG Cope with What Happens Next?

Saudi Aramco CEO Warns Global Energy Supplies on Razor’s Edge

Shell CEO Says Governments Obsessed with Energy Affordability

Vicki Hollub Says Occidental Will Nearly Double Carbon Capture Projects

Conserve and Switch

Global efforts to decarbonize and move away from hydrocarbons continues with an initial push to transition away from coal.

However, Russia’s Ukraine invasion has changed a lot of the thinking around the transition, and even slowed it, pundits reiterated during the EI Forum, pointing to China’s recent boost in coal production. Further, many people worldwide are more concerned today about basic necessities than an energy transition, according to Souki.

“The primary concern of people around the world today is going to be to heat themselves and provide food for themselves. 17% of the hydrocarbons consumed in the world are consumed one way or the other in food production,’ he said.

“If that is the case, if you don’t have hydrocarbons, you don’t eat. And that is a lot more important than what is going to happen in 30 or 40 years,” he added, referring to the many dates floated for countries and companies to reach their net-zero aspirations.

The transition is about decarbonization and can be achieved in two ways, through conservation and switching away from coal, Souki argued. Conservation is by far the most efficient way but many countries are not prepared to actually confront this issue, he added.

“Until we in the West are prepared to say we are going to start this conservation, we’re not serious about decarbonization,” he said.

The second most important thing is to switch from coal to gas.

“Conservation will allow you to reduce emissions by 15%. If you could switch all coal to gas, there would be another 15%. It’s not possible,” Souki said. “There are not enough resources in the world to actually do that. So, we're going to continue to rely on oil, on gas and on coal for a long time to come.”

Souki remains optimistic that over the next several decades the world will be buying gas, “so, the outlook for gas is extremely strong.”

Where Driftwood Stands

The Louisiana-based liquefaction export project Driftwood LNG is seemingly caught between a rock and a hard place after Tellurian scrapped a $1 billion debt offering and saw two key offtakers stand down from initial LNG commitments.

When asked by an EI moderator where Driftwood stands, Tellurian’s main man who also founded Cheniere Energy Inc. in 1996 had a quick response that garnered some laughs from the attendees.

“It stands three miles south of Lake Charles,” said Souki before hinting at why the financing fell apart.

RELATED:

Tellurian’s Bad Week at Driftwood LNG’s Expense

“But, having said this, we’re like everybody else. We’re searching for the right business model. We think we have it. We think it’s a commodity. We think the delta between American prices and global prices is going to remain very similar for a very long period of time. But we have to be able to attract capital on that basis,” he concluded.

Souki didn’t comment about the future of Driftwood, when asked directly by Hart Energy on the sidelines of the EI Forum.