Big U.S. liquefied natgas players move fast; smaller ones try to keep up

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Big U.S. liquefied natgas players move fast; smaller ones try to keep up
https://www.reuters.com/article/us-global-lng-exports/big-u-s-liquefied-natgas-players-move-fast-smaller-ones-try-to-keep-up-idUSKBN1WW0DF
OCTOBER 17, 2019

 gap is emerging in the U.S. liquefied natural gas (LNG) industry as big players such as Exxon Mobil Corp (XOM.N) and Cheniere Energy Inc (LNG.A) race ahead to build export terminals with fewer long-term contracts, while smaller developers struggle to find financing for their first plants.

NG trade has traditionally been underpinned by long-term purchasing deals which finance multi-billion dollar terminals that liquefy natural gas by chilling it to -260 degrees Fahrenheit (-160 Celsius), load it onto ships, and regasify it when delivered.

This is changing. As the market grows and pricing mechanisms diversify, some buyers do not want to commit to 20-year contracts. The growing prowess of oil majors such as Exxon and recent entrants such as Cheniere and trading houses means there are aggregators that can supply buyers more flexibly, making it harder for smaller players.

“The industry is moving away from long-term agreements to justify construction of a new facility to a true commodity business,” said Charif Souki, co-founder and Chairman of Tellurian Inc (TELL.O).

Dozens of LNG export terminals are being planned in the United States with a total capacity exceeding 300 million tonnes per annum (mtpa). That is equal to the world’s entire consumption of LNG last year. Globally, LNG demand is expected to rise 26% by 2024, far short of such an increase in export capacity, analysts said....

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“The industry is moving away from long-term agreements to justify construction of a new facility to a true commodity business,” said Charif Souki, co-founder and Chairman of Tellurian Inc (TELL.O).

And therein lies the big business change.

Decades ago, crude was the same way, not an international commodity inasmuch as it was one targeted to certain refinery needs, mostly controlled by a few large companies.