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Andrew Walker of Cheniere Interviewed at Flame

Posted by on 11 June 2018
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Andrew Walker is Vice President of Strategy and Communications at Cheniere Energy, the U.S. LNG company known for its Sabine Pass and Corpus Christi liquefaction facilities. We spoke to him about the company’s new deals with PetroChina and Trafigura, the outlook for long-term contracts, and the impact of rising Chinese demand.

Cheniere has always been a believer that demand will respond... that availability of supply will facilitate demand somewhere.

The state of the LNG market. Are you very happy this year, or extremely happy?

We’re very happy. At Cheniere, we are developing our US export capacity, we are constructing seven trains in the US (we have four operational, 3 under construction), and we have announced a couple of deals earlier this year, one to PetroChina, and one to Trafigura, a trading house. So we’re feeling pretty pleased that we’re making progress, that the market’s picking up, that we’re in a place that we can kind of move the model forward, and think about the sanctioning of the next train.

Let’s talk about those deals, and how long the contract lengths are, and whether they’re the deals you want to do.

Yeah they’re deals that we were prepared to do, so yes. You can always do a better deal, but at the end of the day those are deals that we were quite happy to do. We came to a negotiated solution with the buyers, so hopefully it’s a deal that works for both sides – that’s the key challenge in the industry, to give your buyers what they want and put yourself in a position where you are going to have something that works for you. For us they’re long term deals. You know there’s been a lot of talk about long-term deals going out of fashion, that everything’s going to be short term. They’re long term deals - they’re 15, 20 + years.

And you would class 15 years as a long-term deal now?

Yes, I think anything 15 years or longer is still a long-term deal – the industry has transacted deals up to 25 years in the past, but 15 – 20 years is still a long term deal. There have been a lot of people saying the industry focuses now on shorter term deals: 1-2 years; 5 years; 5-10 years. In our experience buyers are looking for a mix of terms. They’re looking to transact not only in the short-term and the mid-term, but also the long-term, and to have a much more balanced approach to volume and term these days. But we’re still seeing long term deals in the market place, we’ve still been able to transact long term deals.

So where’s the next bulk of it going do you think?

We are seeing interest from the market place in terms of the next deal – I obviously couldn’t tell you where that is, or who we’re talking to – but I think the market this year seems more buoyant than when we spoke last year. Obviously the oil price is picking up, we’re seeing some momentum in terms of that we’ve announced some deals already, we’re seeing interest in terms of negotiations for future purchases. So the market seems more buoyant now that when we spoke last year.

Did you see that coming?

Yeah, perhaps I’m just an optimist, but we as a company have been saying for a while that the industry fundamentally needs to think about the emerging supply gap post-2020, 2021 / 2022, needs to think about transacting gas to make sure that there’s not a shortage in the future. So yes we have talked to buyers who are aware of that, and who have been thinking about buying. We are believers that we have not seen the last LNG deal done, and that there will be a flow of future deals that will happen.

But where would the market be, and where do you think you would be if there hadn’t been that demand from China?

You’re talking about the demand from China for this year, or for future volumes?

We’ll talk about it for this year, the year just gone.

Well we saw a large growth in the Chinese demand over the course of last year as they put in place clean air policies. The Chinese market grew by around about twelve million tonnes year on year, which for the LNG industry is a very large growth. That clearly helped from the demand side of the industry at a time that new supply was coming on. A lot of people were worried; when we spoke last year I remember we had the discussion about the potential for oversupply, was there too much supply coming on. Cheniere has always been a believer that demand will respond, so we have been believers that availability of supply will mean that that will facilitate demand somewhere. So whether that’s China or elsewhere, we were believers that the market would respond. China is a big gas market, a big growing market in terms of its economics. So are we surprised that it’s grown so much? Perhaps not as surprised as some other observers.

But it’s easier to say that now.

Well it is, but we’ve been believers in China for a while. We opened a Chinese office, an office in China last year for Cheniere to kind of show our commitment to moving forward, to grow our business with that market place. So that’s one example of where we were believers in China, and have committed to people on the ground as it were.

Dare I ask how long the lease is on that building in China?

I don’t know, so [laughs]. I think it’s a long lease. We have just signed long term contracts with them, we are looking forward to doing business with China for a long time, with the existing contracts and future contracts.

Do you think the US can maintain its position as the strongest LNG exporter – is it going to keep that position do you think?

Well the US is kind of starting down its journey as an LNG exporter. So we exported our first cargo two and a quarter years ago now. And it’s now had two years of exports, I think last year it exported around about 12 million tonnes, but it’s growing to become a 70 million tonne exporter just based on what’s under construction. So that would make it the third largest exporter. But I think our belief is that as we move beyond that capacity in 2020 it will become the world’s largest exporter; could potentially become the world’s largest exporter based on some forecasts. And we’re a believer that there will be continued contracts, continued deals that will facilitate exports and continue growth. We at Cheniere are prepared to help that, we are ready to expand our projects and continue to put trains in place to meet global demand for US LNG exports.

So, you mentioned what we talked about last year – what are we going to be talking about next year then?

Hopefully more deals, more trains, continued growth of Cheniere. I think we will be talking about some other things as well; the market’s starting to pick up, certainly there’s a much more optimistic feel to the market place now, and I think hopefully that will continue to build some momentum. We will see more deals across the industry, we’ll see new emerging importers, we’ll see some new exporters perhaps, and we’ll see continued growth of the US export model, including from ourselves at Cheniere.

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