Cheniere Energy sees more value in selling the excess capacity it has created at its two US liquefaction terminals and buying back company shares before sanctioning any new liquefaction units, CEO Jack Fusco said Dec. 4 .
Fusco's comments, in an interview with S&P Global Platts, put a finer point on previous remarks suggesting that a proposal by North America's biggest LNG exporter to build an up to 9.5 million mt/year expansion using midscale-size trains at its Texas facility is a secondary priority heading into 2021.
Given its scale and one-stop service options, Cheniere has the luxury of growth opportunities through optimizing its existing portfolio. It also is cognizant of the challenges that developers continue to have securing sufficient commercial support for new projects. The Stage 3 expansion is shovel-ready, competitive in terms of cost and "will happen when it happens," Fusco said.
"We literally have created a whole other train's worth of production that we would like to term up before we invest one more dollar of capital," he said. "If you are asking me, 'Am I going to jump into Stage 3? One, I'm not going to build it speculatively. And No. 2, buying back my shares right now would be much more value-creating for my shareholders than building additional infrastructure, especially with the excess capacity that we have created for virtually no dollars."
The contracting challenges that many US exporters and developers have had are compounded by pressure from counterparties, especially in Europe, that have strict carbon emissions reduction goals and are shying away from signing new long-term deals for importing US shale gas.
France's Engie recently halted talks with NextDecade about a supply deal tied to the developer's proposed Rio Grande LNG facility in Texas, according to Engie. Prior to that, NextDecade had already delayed a financial investment decision until 2021.
Cheniere already has commercial agreements with Engie and other European utilities and is working on building on those relationships by showing existing and potential customers that it is committed to quantifying and managing its carbon footprint to benefit the environment.
"We feel like we are the connective tissue that gives the world a clean energy source," Fusco said.
Cheniere is looking at the possibility of buying renewable energy to power the liquefaction trains at its Corpus Christi facility, which is surrounded by wind turbines, Fusco said. The company, however, has no plans to make direct investments in renewable generation. Sempra Energy recently said it would package 4 GW of renewable assets into a new unit with its existing LNG portfolio and sell a non-controlling stake in the unit to fund its LNG growth plans.
"It's not quite what Sempra is doing," Fusco said of Cheniere's renewables interest.
Market trends
US LNG export activity, meanwhile, has been surging lately as Asian prices hover around $8/MMBtu. Heading into the end of the year, feedgas deliveries to the six major liquefaction terminals have exceeded pre-pandemic levels, reaching a record of 11.3 Bcf/d on Dec. 1, Platts Analytics data shows.
Cheniere believes the market trends put the company in a good spot with a challenging year, marked by the pandemic, wrapping up, Fusco said.
"Cheniere is 100% sold out for 2020 and significantly sold out for 2021," Fusco said. "At this point, we are totally focused on our operational excellence and making sure that we can produce and ship all the cargoes that our customers want from us."
Amid those priorities, an M&A transaction is unlikely anytime soon.
"We don't need to do any M&A and pay a premium to somebody else, because we have enough growth potential to keep us going for a very, very long time," Fusco said.
