Charif Souki, the founder of Cheniere Energy and the man who made the company the first U.S. LNG exporter in the 2010s—transforming the U.S. energy landscape—has been ousted from a second LNG company he has founded, Tellurian.
Souki's vision to capitalize on the first U.S. shale boom in the early 2010s and kick off the first LNG exports out of America put the entrepreneur on the map of the top energy executives in the United States. The success of Cheniere in building its first export plant at Sabine Pass also made Souki the highest-paid executive in the U.S. in 2013.
Just two years later—and just before Cheniere sent America's first LNG export cargo—Souki was ousted from the company following a clash with Carl Icahn, the activist investor who had bought a stake in Cheniere.
At the time, Icahn did not agree with Souki's plan to expand Cheniere beyond its core business of exporting LNG.
"There is no doubt that Charif Souki has proven that he is a talented entrepreneur but at this time there is also little doubt that the board wished to move the company in a direction that differed greatly from the path Mr. Souki wanted," Icahn said at the end of 2015.
"It is also telling that Mr. Souki sold a great deal of his stock, which made it somewhat easier for him to "swing for the fences" making it a win-win for Mr. Souki but not necessarily for the shareholders."
In 2016, Souki co-founded Tellurian, which plans to build Driftwood LNG, a production and export terminal on the Calcasieu River south of Lake Charles, Louisiana. Once complete, the terminal will be capable of exporting up to 27.6 million tons of liquefied natural gas annually.
But at Driftwood LNG, Souki had a different vision of how the project would monetize exports. Unlike other LNG export projects, which are underpinned by long-term offtake agreement with customers that lead to final investment decisions, Driftwood LNG would own gas wells in Louisiana, transport the gas, liquefy the gas, and sell it under agreements pegged to international indexes—making those sales vulnerable to downcycles or muted international natural gas prices.
This business model failed to attract enough customers. In fact, Shell, Vitol, and Gunvor have all withdrawn as potential customers of LNG from the Driftwood project over the past year and a half.
In October 2023, Tellurian applied for a three-year construction permit extension with the Federal Energy Regulatory Commission (FERC) to complete the construction of the Driftwood LNG facility, as progress was slower than expected.
And in November, Tellurian said liquidity issues "raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued."
In early December came the departure of co-founder Souki, who was terminated "without cause" from his position as executive chairman. On December 20, Tellurian said in an SEC filing that a Separation and Release Agreement with Souki was signed, which included the resignation by Souki from the board of directors effective as of December 19, 2023.
The ousting of Souki from Tellurian and Tellurian's troubles in signing up willing customers for LNG offtake highlights the fact that the LNG market and its top traders – Shell, TotalEnergies, and the big commodity trading houses – currently prefer long-term LNG contracting at prices less vulnerable to the short-term swings in natural gas markets.
Long-term LNG contracting for the U.S. developers has seen a flurry of deals in recent months, including from buyers in Europe, where energy security has taken center stage at the expense of concerns about emissions from natural gas imports.
Cheniere, Venture Global LNG, and NextDecade have signed major long-term deals with European customers in recent months.
The United States and Qatar are frontrunners—by a mile—as the LNG exporters best positioned to capture the global demand for additional supply capacity over the next two decades. That's the estimate by Wood Mackenzie, which sees the abundant, low-cost natural gas resources in the world's current top two LNG exporters as the key factor for their export capacity growth.
In addition, the U.S. and Qatar also have competitive pricing and "astute commercial partnering," which could secure them a combined market share exceeding 60% by 2040, WoodMac says.
By Tsvetana Paraskova for Oilprice.com
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