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Gas Exporter Talks ‘Energy Business’ With Chu Gas Exporter Talks ‘Energy Business’ With Chu

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ENERGY

Gas Exporter Talks ‘Energy Business’ With Chu

A top executive whose company is poised to be the first exporter of natural gas from the contiguous United States in more than 40 years met with Energy Secretary Steven Chu on Thursday, just as concerns over exporting the resource increase both on Capitol Hill and across the country.

Charif Souki, president and CEO of Cheniere Energy, said in an interview with National Journal Daily on Friday that he met with Chu during a trip to Washington this week. The Energy Department approved Cheniere’s application in May 2011 to export natural gas from a facility in Louisiana—the first such federal approval from a list of about 10 companies.

 

The meeting signals that natural gas—and specifically companies’ desire to export it—is a high priority for the Obama administration at a time of increased scrutiny. Cheniere is the first, and so far only, company to get DOE's approval, and the scrutiny will likely increase as President Obama continues to focus on natural gas as a clean, domestic energy source. “I thanked them for the good work the agency has done with us and we exchanged our observations about what is happening in the energy business,” Souki said in a wide-ranging interview in Washington.

Congressional Democrats and some industrial users of natural gas, such as manufacturers and chemical companies, are concerned that exporting natural gas will raise its price, right now at worldwide lows of between $2 and $2.30 per million British thermal units (down from nearly $14 per million Btu in 2008).

House Natural Resources Committee ranking member Edward Markey, D-Mass., has introduced a bill that would ban exports of natural gas, but the measure has not gained much support.

 

Souki dismisses concerns that prices will rise substantially given the oversupply of gas right now. He predicts the U.S. will continue to have a glut of gas until the country finds something to do with all of it.

“We’re in March. We’re supposed to be practically empty in terms of [gas] storage; we’re 60 percent full,” Souki said. “Gas consumption in March, April, May, June is going to plummet until it starts to get really hot and the air-conditioning load starts increasing. So we’re going to have very low consumption with inventories almost full.”

Souki noted that 5,000 wells across the country are waiting to be drilled but aren't due to the glut of gas and low prices. "It is not a pretty picture,” Souki said. “There is no place to put that gas.”

Cheniere still needs approval from the Federal Energy Regulatory Commission. Souki was disappointed—although not surprised—that FERC did not consider its application in a monthly meeting the commission held on Thursday. “I was hoping they would without too much expectation,” he said. “It would be very unusual to be on the calendar on the very first possible date that we could be.”

 

FERC is reviewing the application for its safety and environmental impact, while DOE’s review is focused more on how the facility could affect the country’s economy and whether it’s in the national interest.

Souki said it’s important to get approval from FERC in the next several months before the prices of materials needed to build the facility go up. 

General Electric wrote a letter of support for Cheniere's application to FERC on Tuesday. GE, whose CEO, Jeff Immelt, chairs Obama’s Council on Jobs and Competitiveness, said the export facility will help GE create jobs in several states, including Ohio and Virginia. “The supply chain for this opportunity extends to multiple businesses in Iowa and New York, and this project will be serviced over a period of twenty years from a facility in Texas,” writes Dan Heintzelman, CEO of GE Oil & Gas.

The export terminal will use aircraft engines, with parts manufactured by GE, to compress the natural gas, which Souki says will make Cheniere the “single largest American buyer of aircraft engines.”

“If we can’t build our facility, maybe we’ll start an airline,” Souki joked.

Souki hopes to break ground as soon as April on the $10 billion facility, which will be the country’s first export terminal for natural gas since 1969. The only other U.S. export terminal is in Alaska whose gas is sent to Japan. Federal law requires the government to approve export plans to 15 nations that are trading partners, but companies seeking to export gas to other countries must get approval from the Energy Department.

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