HomeBusinessUS gas export pioneer's venture fails amid hungry demand

US gas export pioneer’s venture fails amid hungry demand

US energy magnate Charif Souki’s plans to build a $25 billion natural gas export plant are on the rocks after the project lost crucial buyers and failed to raise funds despite rising global demand for the fuel following the Russian invasion. from Ukraine.

The stumbling blocks are a major blow to Souki, a liquefied natural gas pioneer in the US, and may point to difficulties in attempting to quickly expand America’s capacity to carry more energy to Europe.

The setback comes as European officials urge the US to send more LNG to relieve countries on the brink of recession after Moscow pressured their supply of Russian gas.

Shares in Tellurian, Souki’s company, plummeted about 40 percent last week as investors lost confidence in its ability to supply the massive Driftwood LNG project on the coast of Louisiana, designed to liquefy up to 27.6 million tons of U.S. gas per year. to make.

Tellurian announced Friday that oil supermajor Shell was withdrawing from a gas sales agreement with the company and that it had to end a similar deal with Vitol. The long-term contracts, each for 3 million tons per year, formed a crucial financial basis for Driftwood.

The deals were scrapped days after Tellurian was forced to suspend a $1 billion bond sale, offering investors a return of more than 12 percent, indicating it would not be able to raise funding for the project anytime soon.

Souki said in a video on YouTube that the inability to raise money “set us back for good” and added that he would try to sell shares in Driftwood LNG to a “strategic partner”. Tellurian declined to make Souki available for an interview on Friday.

Analysts said Souki risked missing a golden opportunity amid raging global demand for LNG.

“If Driftwood can’t make it now, under what circumstances can it?” said Clark Williams-Derry, an analyst at the Institute for Energy Economics and Financial Analysis. “If they lose interest from banks and they’re now losing interest from their customers, that’s saying something pretty fundamental.”

Driftwood’s problems are all the more serious because it was Souki who pioneered the export of US gas by sea, taking advantage of rising shale drilling production when he converted his former company, Cheniere Energy, from an importer to an exporter of LNG.

Cheniere later ousted Souki just weeks before his first charge in a boardroom coup orchestrated by activist investor Carl Icahn. It is now by far the largest US exporter of LNG, with more than half of its total capacity.

Souki returned to the industry in 2016 with the launch of Tellurian, using his star power in the business to raise capital and close first deals with major industry players. But he’s struggled to keep up the momentum, even as others like Cheniere and Venture Global have continued with new projects in Texas and Louisiana.

Moscow’s invasion of Ukraine gave Souki and other proposed LNG plants in the US an opportunity as Europe turned to America for gas supplies. Souki told the Financial Times earlier this month that US producers would benefit from the gas crisis and said Europe’s “lack of strategic thinking” was the root of the energy crisis.

Analysts still expect some projects to be built in the coming years. But problems at Driftwood suggested the reality remained difficult given longstanding doubts about the fossil fuel demand, Williams-Derry said.

“What I’m seeing is an end to the euphoria and a grounding in the hype about US LNG and a re-evaluation of which of these projects will be truly financially viable over the next 20 years,” he said.

#gas #export #pioneers #venture #fails #hungry #demand



Please enter your comment!
Please enter your name here

Most Popular