Transcript of Energy Conference Call on APA and Total’s Suriname Exploration Efforts, Parsing Delfin LNG Hype and Energy Transfer Impacted by Change in DOE Export Authorization

May 02, 2023

On April 28, The Capitol Forum’s Teddy Downey, Daniel Sherwood and Sharon Kelly held a conference call to discuss the most pertinent issues impacting energy markets and policy. The full transcript, which has been modified slightly for accuracy, can be found below.

TEDDY DOWNEY:  Welcome. Thank you, everyone, for joining us today for our weekly Energy Conference Call. I’m joined today by my colleagues Daniel Sherwood and Sharon Kelly. How are you two doing in this sort of gloomy weather, at least on the East Coast, Friday?

DANIEL SHERWOOD:  Hanging in there. There’s some sunshine right here, right Teddy?

TEDDY DOWNEY:  Yeah, exactly. It’s always a fun Friday at The Capitol Forum. So before we get started, I just want to really quickly note we haven’t been getting a ton of questions with the new app format. So we want to try going back to our old format. If you have a question, email us at That’s And that’s capitol with an “O”. And with that, let’s jump right in here.

We want to talk about APA and Total oil exploration in Suriname. How does the joint venture’s exploration history in Block 58 inform our opinion on the likelihood of development moving forward promptly? So I’ll turn things over to you, Daniel.

DANIEL SHERWOOD:  Awesome. Thank you. And Sharon did a great job on running these things down and reached out to both Total and APA, which gave no new official update beyond what’s been said publicly. But Total spoke briefly to this development project yesterday during their earnings release. And Sharon’s going to get us all abreast of those comments. But before we dive in quickly, just providing some context.

We wrote about this project in 2021, I think spring of 2021. Why is this important? Exploratory oil efforts have been reduced in recent history. Offshore oil discovery is a big deal in the industry. They’re high volume and can have super, super long lifespans. Due to this energy transition and due to the efforts to decarbonize our economy, investors have grown — financiers behind the projects and the companies themselves if they’re internally investing in them — less inclined to invest in offshore plays due to the capital intensivity and that longer timeline of operation.

So that’s why we looked here. This is one of the most hyped areas right now. There’s been recent success in nearby Guyana, offshore by Exxon and Hess, but also that’s still in development. And so people are kind of seeing this as the sister development, maybe the Eagle Ford to Midland, could be an apt parallel.

So when we did a deep dive on this in April 2021, we received a lot of feedback and it was an interesting process. And basically, we looked at these appraisal wells and this Block 58. And we said, look, there’s some chance of them hitting pay grade oil. We see what they could read and access as far as the actual results but there are also barriers to success there, like how much deeper it is, how waterlogged it could be, and then the gas to oil ratio.

So in our 2021 story, I think it was supposed to FID at the end of the year then. And we were like, I’m not so sure. Now, it’s 2023 and it’s still yet to FID. And I think that’s enough table setting from me. Sharon, do you want to take it away from there?

SHARON KELLY:  That’s perfect. So, if you look back at APA’s first earnings call of the year back in February, they had floated the possibility of a hub where APA and Total could co-develop Sapakara, which is like the so-called shining star of Block 58 and Krabdagu, where APA was currently drilling a couple of appraisal wells, Krabdagu 2 and Krabdagu 3. And, please forgive my pronunciation of some of these names, I’m sure I’m Anglicizing them a bit. So I appreciate it if you bear with me on that.

But in any case, so what we had previously heard was essentially that APA and Total appeared to be waiting on the results from these two, Krabdagu 2 and Krabdagu 3 appraisal wells, with some apparent apprehension or signs of large amounts of natural gas and possibly water in the oil formations there. You know, APA is generally highly enthusiastic about Suriname. But in a little bit of contrast to that, what we heard from Total in late 2022 was a little bit of concern over some of the early drilling results.

You might recall that in October 2022, Total CEO Patrick Pouyanné described a “lack of confidence in understanding the reservoirs discovered to date, driven by a mismatch between what the seismic data shows and the results of delineation wells.” So clearly some concern there.

In February, Pouyanné updated on Suriname during Q&A and he continued to call it a “little bit more complex” than some of the company’s other exploration efforts, like in Namibia. He said that they had the first half of an oil pool confirmed and expressed hope that they would be able to confirm that they have the oil pool that they were looking for in Suriname.

In the Q&A yesterday, Pouyanné said that they were still waiting on final results from the Krabdagu appraisal wells. He also mentioned difficulties in Suriname, which is an unusual word. It’s a striking word to use in the context of a new oil and gas exploration effort, referring specifically to how gassy drilling results have been. What he said specifically is, “so the good news is that we’re trying to develop an oil pool. The difficulty in Suriname is that the oil to gas ratio is quite high. So what we want is to identify an oil pool with a lower condensate to gas ratio in order to be able to plot an efficient development.”

DANIEL SHERWOOD:  Yeah. And you know, this is kind of interesting, right? Because APA loves this play, but they’re not very transparent about it. That was a whole section of our 2021 piece. So, the information out of APA is limited. And it has parallels of other instances where APA found way too much gas in their Alpine High play for instance. And so now here we have the other part of the joint venture that’s the non‑controlling, you know, the non-operator, the non-driller. And they’re entitled to the same information, or at least the majority of the same information, that APA is and seem a lot less excited. But they need to temper their tone to kind of fit with what APA is saying.

And last year, Sharon highlighted this to me. But, you know, it’s Christmann, right? The CEO of APA is kind of trying to say, look, it’s not like we’re waiting for the second pool to move forward. It’s just like, if we could do it, it would be awesome and big. And my reaction to that is, well, that kind of sounds like you’re waiting. So I think my read of how this is being spoken about is that there’s a lot of hesitance, not a lot of excitement. And I’m not hearing the language that you’d expect to hear if you actually expected imminent FID.

SHARON KELLY:  And one of the interesting things here is that you have this this gas to oil ratio issue from Total. And gas to oil is a sensitive area for both companies. Not only would it cause a lot of turmoil for APA sort of notoriously when it came to their Alpine High play, but it’s also particularly tricky for TotalEnergies which is a French company. They’re subject to EU reporting standards.

And this comes at a time when there’s increasing concern from investors over methane flaring and venting. And this is in Suriname. It’s a country that lacks the infrastructure to handle mass volumes of gas. That could raise the potential cost of production. Venting and flaring, they fall under scope one and two emissions. And those are the most closely watched categories for oil and gas companies that are trying to differentiate themselves from their peers on greenhouse gas emissions. Those are the emissions that they control. And so if you have a play that’s got a lot of flaring and venting associated with it, that becomes a more complex or difficult — to use Pouyanné’s language ‑‑ situation for Total.

TEDDY DOWNEY:  So just a quick couple of questions here, just to put this in context for me, who doesn’t know very much about this region or sort of this problem. Is this bad for the individual companies? Are there any broader implications, any kind of geopolitical implications? Just want to get your thoughts on how to contextualize this. It seems bad. I mean, it seems like we’re reading between the lines that they’re in some trouble here with this joint venture that people care about.

DANIEL SHERWOOD:  Yeah, I’ll go first. And Sharon, feel free to hop in. I’ll take it in two parts. One, from an industry perspective. And two, from the global perspective.

From an industry perspective ‑‑ and kind of honestly one of the reasons why we looked at this ‑‑ is what we presented on two weeks ago, this wave of acquisitions and cash infusion in the Permian that’s continued to emerge. It’s nothing new as one of the hottest oil plays. And companies worldwide are trying to figure out how to get access to the Permian. And so you compare that with other places that are considered, you know, that are focused on as key areas of development. Where companies are saying, “this is where we want to be.”

And so that’s what I was saying at the beginning. This is an important play in the context of an exploratory effort and looking for large oil basins that can be producing for decades into the future, which used to be the gold standard. That’s what this stands for. And it’s the kissing cousin, so to speak — that phrase is weird ‑‑ but of the Guyanese development which has been much more proven – already producing barrels economically.

So in that sense because, yes, on a global perspective, it continues to make us think that the Suriname play may not live up to the hype that it’s initially been associated with. But further, Latin America is a hot play for exploration. And The Wall Street Journal broke that ExxonMobil abandoned its efforts in Brazil. So it’s like this could be yet another domino of, okay, there’s one less basin out there that the industry thinks is going to be really successful.

And from a geopolitical perspective, when you’re talking about large volumes of oil, you could talk about so many things. Is it OPEC plans? Is it the United States’ plans? Is it in relation to Venezuela and Maduro’s rule? Yes, to all of the above. I think what would remain to be seen, and how this would impact things, is let’s see if they can get it off the ground, if they can start producing barrels, if they start generating tax revenues to the degree that Staatsolie and the government regulators expect. If they can, the next questions would be how that would change a relatively fragile geopolitical position both in on a regional scale, and beyond. So those would be my first thoughts. Sharon, is there something that you want to add?

SHARON KELLY:  Just that if they are waiting on the results of an appraisal well, I don’t want to rule out the possibility that, I mean, there very well could be that oil pool there that they’re hoping for.


SHARON KELLY:  But what we are seeing ‑‑ or we do know we have seen so far ‑‑ it’s a much slower development pace. I think if you look at like the press in Suriname, they’ll often compare Total and APA’s efforts to neighboring Guyana. And it took ExxonMobil two years to make it in Guyana. You know, clearly APA and Total have been much slower. And Block 58 is right next to the Stabroek block, which is in Guyanese waters. And ExxonMobil just yesterday announced FID on the fifth development project right there. And actually, that project alone is equal in size to the high-end estimates that APA and Total are talking about.

DANIEL SHERWOOD:  Wow. I didn’t know that.

SHARON KELLY:  That’s 800 million barrels for this project. ExxonMobil took FID on one of their five projects is similar in size. So we’re still at ‘wait and see.’ But I think you’re correct to sort of emphasize that what we do know so far, which is limited, the tone seems to be a little bit more restrained.

TEDDY DOWNEY:  Again, since I’m not as knowledgeable as you two, to someone like me, hearing that there’s a lot of gas, and like strategically natural gas is important, it doesn’t sound so bad. I get the environmental issue. I get the, all right, well, how are you going to get it there? But are there solutions? Well, if there is a lot of gas here, can we make this a gas play? Or is it oil? Does this really need to be oil?

DANIEL SHERWOOD:  A great question and a great segue into why we’re going to be talking about floating liquefied natural gas facilities. And yes, gas is a valuable commodity. And gas is developed, produced that is, offshore at large volumes.

The reason why – APA is looking for oil. And when you model what this looks like and when you model how expensive everything’s going to be to drill, to have the platform, to get it to shore, to export it, you model that based on the underlying commodity cost or price of oil, not natural gas in this case.

As we all know, natural gas trades at a far higher discount than oil. And gas is more plentiful and easier to access onshore. They’re burning it in the desert in Texas. And there’s transportation issues. They don’t know how to get it to the coast in the east. So, you don’t need to go into super deep waters far off the coast – that’s just not what they’re searching for.

SHARON KELLY:  Yeah. I mean, I think the main thing with natural gas is that it’s relatively easy to produce. It’s relatively difficult to transport. And if you’re talking about an offshore oil and gas well, there’s more infrastructure. It raises the costs associated with a project. And that changes the funding of development projects like that.

TEDDY DOWNEY:  That makes sense to me. Let’s move onto the next question here. So, Delfin. So, this is interesting to me. Because Delfin announced that it finalized a supply and purchase agreement with Hartree Partners, hoping to reach its long delayed FID this year. How does this announcement factor into our analysis of the project’s timeline? And I’m also kind of interested in like how important this — I’m curious how an investment firm does this supply and purchase agreement? I would think it would be ‑‑ I guess they have traders too. But maybe explain if that’s a typical arrangement or not. I’m curious about that also.

DANIEL SHERWOOD:  Yeah. And this is floating liquefied natural gas. So this speaks to what Sharon was just saying about the difficulty in transporting it. This is in a different direction. It’s gas onshore and they’re trying to get it offshore to then export it. But New Fortress, for instance, is trying to produce floating gas to reduce stranded gas.

Anyway, Delfin is a fascinating place where we love to focus. Hartree signed this agreement with their subsidiary that owns generation assets in the UK, and so that’s who contracted with Delfin here. But Hartree also has, to your point, other ‑‑ you know, it’s an interesting relationship. I wouldn’t say it’s different. Other commodity traders signed deals with this project and other projects. But it does kind of make, you know, I think it’s worth looking at just because there are some interesting relationships between buyer, seller, and owner here.

TEDDY DOWNEY:  I just want to stay on this for a second. Are there like insider trading issues with stuff like that? Do you have access to information about commodity prices or something like that? Or is it walled off? Or is it just kind of so typical that no one really thinks about that? It just seems like if you have this agreement, this type of agreement, you have a lot of insight into traded volumes and things like that? I don’t know.

DANIEL SHERWOOD:  No, you’re right. I mean, it’s an interesting area and it’s one with a lot of opacity. And I mean, right now, for instance, the states are trying to bring an enforcement action against a commodity trader for manipulating the market during, I believe it was the winter storm Uri. And have, in my opinion, relatively compelling information about the timing of the trades, the knowledge of the trader, where it was placed and how, etc. I didn’t do a deep dive on it, but I looked into it and talked to a few people and they were like, “they don’t have anything. Like, there’s not going to be an enforcement action here.”

So, yes, people are looking at these things as far as possible market manipulation with some traders, increasingly, especially recently. I think especially given that some of these commodity traders continue to just post just huge, huge numbers. And it wouldn’t be the first time. I mean, there’s a lot of places where it can show up, whether it’s the warehousing? Is it on the supply or demand side?

There’s a unique FERC order out there ruling that JPMorgan had to acknowledge its affiliation with a utility. So it’s kind of a meandering answer. But yeah, I mean, these relationships do get looked at. I don’t know enough about the specificities of this to comment about actually what it would look like internally at Hartree. And, of course, these firms have assurances and compliance provisions in place to avoid ethical and legal issues. So I don’t want to just breeze by that. This is something that they’ve thought of. Compliance is important to these firms. But yeah, it is interesting and it’s something to watch for sure.

TEDDY DOWNEY:  Okay, cool. And then just back to the ‑‑ sorry to distract, but how are you thinking about the timeline here?

DANIEL SHERWOOD:  Yeah, so we have been talking about Delfin LNG a lot. I mentioned why we talk about this project in particular. The floating nature of it makes it unique. You know, we like to talk about incremental volumes. We like to talk about how things get modeled broadly and whether it’s accurate.

Two weeks ago, we spoke to this growing consensus that development of LNG in North America is going to be harder than what was initially perceived, that it’s going to be harder to get all these projects off the ground when, kind of broad brush, the market was seeming to assume that everything was going to happen due to this notion of a huge gas shortage in Europe. We had a warm winter and we escaped the energy shortage that people were freaking out about. And that’s one of many reasons why some of these things have come up.

As you know, we’ve been talking for a while about how that’s been our opinion, how we forecast that many of these projects weren’t going to launch. Now that this consensus has built, there’s more information out there about these timelines. RBN, one of our favorites, posted, for instance, this week a very helpful map where they color-coded the likelihood in which they thought which project would advance versus which one was under construction, so on and so forth. We agreed with most of, some of, what they say.

But again, stay tuned because we’ve already been saying it. But here we wanted to give this update because this SPA announcement with Hartree was kind of pitched as, “Look, Delfin’s moving forward. We got this.” But under the hood and there are some interesting findings. So Sharon, please take it away.

SHARON KELLY:  So, like you mentioned, this is another project that’s predicting an FID for 2023. But this is not the first time that there’s been expectations built around a date for Delfin. We did see this flurry of headlines, like you mentioned, about the Hartree SPA. What the Hartree SPA, the Sales and Purchase Agreement, is it’s for 0.6 million metric tons per year of LNG. That’s on a FOB basis for 20 years and it’s indexed to Henry Hub. Those are the parts of an LNG deal that are most closely watched.

The announcement comes after last year, Delfin signed a sales and purchase agreement with Vitol for 0.5 million tons per year. This one was a 15-year agreement, which is shorter than the industry standard. Twenty years is pretty standard for an LNG offtake agreement. And then you also have two 1 million ton per year agreements in the past year, in 2022, between Delfin and Devon and Centrica respectively. There’s an asterisk, however, after those two 1 million tons per year agreements.

Delfin has marketed its floating LNG projects as a sort of benefiting from these very low FID thresholds. But if you look at the fine print here, there’s a reason for apprehension. The Devon and Centrica deals are what are called heads of agreements. They’re not sales and purchase agreements. And that’s an extremely important distinction.

HOAs are basically like agreements to agree. They’re generally non‑binding. They suggest that the parties haven’t yet reached agreement on key terms. And historically, if you look back over the history of the LNG industry, the conversion rate from HOA to SPA, it’s been previously described as quite low.

So there’s not necessarily a stellar track record in the LNG industry writ large at transforming HOAs into SPAs. Delfin itself, they previously had multiple memorandums of understanding and other deals that they did not actually wind up turning into SPAs. You know, you had a 2017 preliminary deal with China Gas Holdings. They had memorandums of understanding with Litgas and BTG Pactual in 2015. And all of that was before Golar, which was Delfin’s partner, had dropped out of the Delfin project in 2019.

This is particularly ‑‑ all this sort of background is, you know, if you’re trying to add up your millions of tons per year to get to an FID threshold, really one of the key questions is how high is that threshold? And one of the things we noticed is maybe a little bit of like possibly like a shifting goalpost here is that back this past summer, about a year ago, when Delfin inked the Centrica HOA, Delfin’s CEO was touting their ability to make FID in what he called 3.5 million ton per year increments.

So you’re looking at that 3.5 million. Their most recent investor presentation, we can see is a much lower bar for FID. That’s 2.0 to 2.5 million tons per year. So far, if you look at just sales and purchase agreements, the actual binding contracts, they’ve got 1.1 million tons per year. It does mean that ‑‑ this most recent deal does mean that ‑‑ if they’re able to turn one of the two 1.0 million tons per year agreements into an SPA, they’ll be at 2.1 million tons per year, and that’s just over the 2.0 threshold. And the second, you get to 3.1 in SPA, which is again potentially enough for an FID. It’s still less than that 3.5 million tons per year, which is the main capacity.

DANIEL SHERWOOD:  Which is the nameplate capacity. So Sharon’s doing the math. Sharon’s taking the threshold that the company gave and doing the math of what they actually contracted. And in a few ways the numbers don’t actually get there. And conflating the distinction between HOA and SPA is how they get close to this moving target here, they have to pretend ‑‑ well, they don’t pretend. I mean, they use slightly tweaked language to add those HOA volumes to the SPA volumes. And so, in my opinion, that’s a little misleading. And regardless of whether or not you think it’s misleading, it’s objectively lower than what they had forecast in the past and below capacity.

So nothing about that is bullish in my view. And whether someone who is reading that on PR Newswire is convinced is one thing. A financier, on the other hand, is going to know these things. A financier, which is who they need to reach this FID ‑‑ and they’re shooting now for mid 2023, as far as my notes are concerned. But those financers will be looking at these terms and distinctions between contracts – and that could make it more difficult for Delfin to reach FID if investors remain hesitant.

TEDDY DOWNEY:  Got it. So again, just context for me, this kind of pushes out when this is going to be operational further than when they’re guiding as well. Does it also indicate that ‑‑ did they give any reason for why they reduced the expectation? What they need for FID? What’s behind that, I guess? Or do they not say?

DANIEL SHERWOOD:  They don’t say. I mean, like what we’re going to talk about with Energy Transfer and sometimes we’ve discussed the reasons of what’s difficult for these LNG developers. And like there is that increased consensus in the LNG sector that competition, costs, concerns about ESG measures, permitting issues are impacting development. And candidly, I think Delfin’s experiencing all of the above. You know, it’s smaller volumes than their competitors, they’re kind of a niche player. And they’re an outlier in a sector where there’s too many of these projects to begin with. And so they still say that they can bring six floating vessels online. And it’s taken them what, Sharon? Like almost a decade now to reach FID for one.

SHARON KELLY:  And that’s sort of counter to the marketing which is like we’re much more nimble, we’re able to make FID faster. And yet, what we’ve seen is even though Delfin is a much smaller LNG project and a lot of its competitors are huge, massive onshore terminals. They’re still running into difficulties. They did miss – they previously told regulators to expect FID by the end of 2022.

And that’s despite the fact that, like if you look at the most recent presentation, like I said, like generally speaking, the standard for an offtake agreement for LNG projects is going to be 20 years. You know, Delfin has signaled that they’re open to shorter terms, like they’re open to ten years or fifteen years and like they’re a lot more flexible. So I don’t think we have insight into what their thinking is, but we can sort of see these indicators from the outside. And that’s pretty interesting.

TEDDY DOWNEY:  Sorry to take up so much time, but why is competition an issue? Just because you would think that if these companies want price of LNG to go higher — I’m sorry. The price of gas to be higher. These LNG projects are a part of that theme, right? That will make it more global, get it to the places where it’s a higher price or something like that. You know, like raise the price where there’s a lot of it and get it to the places where there’s not a lot. And that kind of raises the price. And then it just seems like there would be a lot of interest in getting as many LNG terminals up and running. Why aren’t people chomping at the bit to help fund these projects, given what it means to natural gas more broadly?

DANIEL SHERWOOD: There’s so many reasons, you know. Kind of the first thing that pops into my head is just stereotypically with these LNG exporters, the way those projects make money are through tolling agreements. Or the way that they make their money is more about the volume and less about the commodity cost.

Other exceptions, of course, like with Energy Transfer, this last one that we are going to talk about, they own midstream assets. And one of the things that they forecast about their LNG export facility is they will increase the volumes of their throughput in their midstream assets to supply the LNG facility. So there are a lot of different incentives on both sides for producer, buyer, seller, and investor. And likewise, governments that have interest in LNG availability for different reasons.

Stereotypically, people talk about the difficulty to price this because it’s not as globally traded as oil. There’s not as good of benchmarks. There are a few that have been recently introduced by some price reporting agencies that we like to talk about. But they’re relatively nascent but with growing popularity.

But there’s still a lot of debate on is it based off Henry Hub? Is it based off JKM? In other words, is it based off of these various different hubs where there’s a lot of import or export of LNG? And there’s not a consensus there yet. So that’s one of the reasons.

The other reason is the construction timeline. You know, it’s super lengthy and super capital intensive. And that’s why we talk about these FIDs so much. And sometimes I feel like a broken record, but I think it’s the nature of the beast. Because the industry uses all these different words and acronyms to try to make it look like these things are advancing so they can get more money. But then those terms themselves lose kind of their je ne sais quoi because they get amended or can be massaged to seem like they’re still about to be ‘shovel in the dirt’ ready. But at the same time, they’re waiting for the next entity who’s willing to lock themselves into a 20-year agreement for LNG supply that they’re not sure even if know that they will need it.

Look at how hard it was for the world to model how much gas Europe would need this winter. That’s two months in advance. So there’s no way that, you know, sure, you can understand it’s a numbers game, right? If I need 100 units and my average is 100, you can bet that I’m probably going to need 20 units of supply.

But I think that’s where that competition is, Teddy. Those entities that know what that baseline volume that they need to offtake, it’s like they have that mostly covered. And it’s because there’s these huge projects. I mean, even the ones that are already running right now, tons of volume. And the ones on the horizon, like Golden Pass we spoke about two weeks ago, I mean, huge, projects. And so stereotypically, obviously, the larger volume, the more economical it’ll be for the off-taker.

And so I think that’s part of the competition. Recently, someone described the LNG industry as pipelines on water, and I like to think about it like that. So I don’t know want to hog the mic, but that’s my answer for you there, Teddy. Sharon, do you have some more help around there?

SHARON KELLY:  The only thing that I would add is the point that you raised, Teddy, ties into the fact that one of the HOAs that Delfin has is with Devon, which is an oil and gas producer. And so as an outside observer, one of the things is that it’s interesting in terms of an industry development. That Devon deal is pretty unique. It was celebrated as sort of a first of its kind deal between a natural gas producer and an LNG developer.

And then the other element is I would closely watch that Devon deal to see whether that turns into a sales and purchase agreement.

TEDDY DOWNEY:  I mean, it makes strategic sense. Especially for a financier that already has a bunch of money in the gas industry in the U.S. I mean, they’re basically like don’t take any of this gas out right now because it’s so cheap. If you already have that money tied up, I mean, I don’t know how expensive it is to finance these projects. But if that’s your most obvious ticket to a higher price for gas, you’d think there would be more of that potentially? I mean, just from a strategic perspective, I would expect someone to figure that out if they haven’t already. This Devon thing seems like an indicator. But I don’t know, especially without that much hope that the price is going to increase, just at least right now.

DANIEL SHERWOOD:  I mean, they are figuring it out to a certain degree, you know? There’s about six, I believe, operating LNG export facilities in the Gulf right now. And you compare that to 2010 and that’s a big increase. And those are all big projects. And then there’s three that are under construction.

So these things are moving forward in places. I think that’s why we like this area so much, because there’s so many projects, so much hype. Because on the other hand, you have the proponents of LNG saying, well, you know, LNG is great from North America because we’ve got cheap gas. Well, then if you export more and more of it, now it goes up. So there are a lot of different factors to consider here. But the overall picture is that LNG export from North America has become a huge ‑‑ has changed global commerce routes. And now what we’re doing is figuring out just exactly how much that’s going to keep on going.

SHARON KELLY:  I think one thing to keep in mind is that like right now, I think for a long period, we’ve seen a period where domestic natural gas prices, there’s been this gap between U.S. prices and LNG prices. But LNG prices are volatile too. It’s not just domestic natural gas prices. And so that’s not guaranteed in the future that you’ll always see a major difference, a major sort of profit to be made there.

TEDDY DOWNEY:  That makes sense. Now, let’s keep going. So let’s get to this DOE export authorization issue. So an extension for a deadline to export LNG from Energy Transfer’s Lake Charles project was denied by the DOE. An outlier compared to the agency’s more expected extension approvals. Could this signal a greater change at the agency? And what could it mean for Energy Transfer and LNG development projects more broadly?

DANIEL SHERWOOD:  Yeah. We’ll be real quick. Thanks, everybody, for sticking with us. A change worth observing. I thought that that denial was very well-reasoned, very well written. It didn’t strike me as a political appointee executing a vendetta against the industry. It struck me as a genuine consideration of what’s going on here. One of the petitioners was IECA. So you have industry as well saying, look, you can’t just keep on blanketly extending these things. And the conditions of these approvals to trade and to export to non‑FTA countries you need to start construction in seven years.

They denied this extension to Energy Transfer. According to the agency, this was the first time that a company ever asked for a second extension and that’s why they denied the company’s request. And now they’re changing the rules too – in order to ask for a first extension, you need to start construction.

So, yes, it has broader implications for the industry. And yes, it impacts Energy Transfer. Energy Transfer still has two years to start construction and they have more agreements from a tonnage perspective than, say, Delfin. They’ve also had issues, Shell dropping out, so on and so forth. You know, they’re the first ones we talked about as citing competition issues earlier this year, Teddy, as a reason why they had a difficulty in reaching FID when they forecast. But we’ll keep watching.

And there is a timeline in which they can reach those goals. And I’m not going to posit to that anything other than this is their only LNG asset. So if this doesn’t work for them, they don’t have LNG exposure directly. So that’s worth noting.

But then I think more importantly, broadly speaking, this change in the rule, it shows the administration, I think, kind of practicing a little bit more of what they preach of saying, “hey, you know, we are worried about decarbonization. And if we continue to extend these things and let you start construction in 2045, that’s not going to help us reach net zero in 2050.”

TEDDY DOWNEY:  Yeah. And it just kind of creates a bigger incentive to actually start making this stuff, right? Which creates economic activity or what have you. I mean, it just gives us more clarity in which projects are actually going to happen and where there is going to be action. It makes sense. I mean, markets always say they want clarity. So they can’t be too mad about it, I think.

Well, we got through a lot. I know I learned a lot. I know I learned a ton and I’m excited to hear what you guys have for us in store next week.

DANIEL SHERWOOD:  Thank you, Teddy. Appreciate it. Thank you, Sharon.

TEDDY DOWNEY:  Yeah. Thanks, Sharon. Thanks, Daniel. And thanks to everyone for joining the call. And this concludes the call. Have a great weekend, everybody. Bye‑bye.