Transcript of LNG Market Update Conference Call to Discuss North American Exports Looking for a Home & New Projects on the Horizon with Brad Williams

Oct 07, 2021

On September 30, The Capitol Forum hosted a conference call with Brad Williams of Spitfire Energy Advisors to discuss the state of play for the North American LNG export market and a status update on the projects under construction and those awaiting a final investment decision. The discussion also explores the European energy shortage, Russian supply, North American storage, Tellurian, and New Fortress Energy. The full transcript, which has been modified slightly for accuracy, can be found below.

MR. DANIEL SHERWOOD: Thank you, Mallory. And good morning. Welcome to The Capitol Forum’s LNG Market Update. I’m Daniel Sherwood, Senior Correspondent at The Capitol Forum and I’m joined today by Brad Williams. Thank you for joining us today, Brad. We are very happy to have you.

Brad is at the center of gas and electricity markets. He’s the head of Spitfire Energy Advisors and his expertise in U.S. and global LNG markets guides his clients through all facets of the industry, from fundraising to project development to contract negotiations and much more.

Today, we will discuss the record prices seen in the LNG and natural gas markets and how those dynamics influence projects that are under construction and those that are looking for buyer contracts, hoping to get financing and make a final investment decision. There’s a lot to talk about, but I just have a quick piece of housekeeping here before we start. For the first 20 minutes or so of the call, I’ll interview Brad and we’ll leave some time for questions from the audience. If you do have any questions, please email them to That’s Capital is spelled with an “O”.

All right. So, I’m excited to hear what you have to say, Brad. Welcome. Thank you again for joining us.

MR. BRAD WILLIAMS: Yeah, Daniel, absolutely. And welcome to everybody on the call. Daniel, as you and I have talked about over the past years, a lot goes on in the LNG business and there’s certainly a lot going on now and these high prices are certainly having a dramatic impact. So, ask your questions and we’ll see what we can share with the audience.

MR. DANIEL SHERWOOD: All right. Let’s do it. And yes, you’re right, there has been a lot of buzz around prices. We have record natural gas prices in the U.S., U.K., globally, high prices for LNG going to Asia and Europe. Analysts predicting oil at $80 to $100 a barrel. Can you catch us

up here? I know there’s a lot, but let’s start with the feedstock natural gas. And how does this impact the revenue of existing LNG exporters who are sending molecules abroad?

MR. BRAD WILLIAMS: Yeah, that’s a good place to start is follow the money. You think about everything that’s going on in the world now. A year ago, we had U.S. exports down at four Bcf a day and now it’s at max capacity, about 10.5 Bcf a day of LNG exports.

To try and give a little perspective on what that means: a 160,000 cubic meter vessel is about 3.7 million MMBtus – about 3.7 Bcf. So, a $10 move in the spot price of LNG going to Europe or going to Asia, that can be $37 million of incremental revenue per cargo. If you think about a capacity holder at Freeport or Cameron in the U.S., if they’ve got capacity of 2.2 million tons per year, that’s about 230,000 MMBtus per day. It would take about 16 days to fill a 160,000 cubic meter vessel which would cost about $1 million. So, if you’re getting an incremental $10 price bump per cargo, you’re making tens of millions of dollars on the spot cargoes.

Now, that is a spot cargo. The traditional Brent Index contract price is still back down at around a $8.00, $8.50 a MMBtu. So, the spot traders are making big money. But last year they were losing big money. You think about the capacity payments at Freeport at $2.90 a MMBtu, that cost them about $20 million per month for every month, they were not utilizing that capacity. So, this is certainly a high stakes game. And I hope that math is not totally lost.

I think the moral of the story is at these super high prices, there are tens of millions of dollars being made per cargo to help make up for the shortfall in revenue that a lot of these LNG merchants had last year.

MR. DANIEL SHERWOOD: Yes, it speaks to the gravity of what we’re experiencing. I mean, do we have an idea of how many of these spot cargoes are coming out of the Gulf, for instance? Because most of that is contracted out, is it not?

MR. BRAD WILLIAMS: Yes, the LNG capacity on the Gulf Coast is fully contracted. About half or a little more than half is contracted to end users like utilities, Osaka, JERA, companies like that. But there’s a lot of capacity that comes out of the Gulf that is merchant, meaning not dedicated to a specific buyer. You think about BP which has four million tons, Mitsubishi, Mitsui, these guys are more the trader types. Or Total, they took the two million tons from Freeport. So, you can imagine Total is selling this as a part of their portfolio probably goes to long-term contracts, but a lot of this capacity sold as spot cargoes is going to really benefit from these super high prices.

MR. DANIEL SHERWOOD: I see. So, that gives us a good idea of the impact to what’s already being produced and shipped. What about how these high prices, how do they impact the outlook for new LNG projects, the ones that are in development?

MR. BRAD WILLIAMS: Yeah, yeah. A good question, right? There’s a lot going on the construction side too. You think about, people talk about, the U.S. LNG capacity being fully contracted. Well, those contracts are really the financial security for an LNG terminal to get debt and to get built; in essence, to make that final investment decision. So, most LNG terminals need to have those long-term commitments to be able to make an FID, get the financing and get in the construction phase.

You think about two projects or three projects that are in construction now.

LNG Canada is rolling forward based on the security of its sponsors. Shell is a big buyer or a big holder of the capacity. And then the other partners with KOGAS, et cetera, are the financial security that allowed that to get built. But about 60 percent of that capacity is contracted under long-term agreement. A company like Shell can afford to play the merchant game.

Down on the Gulf Coast, we’ve got Venture Global in construction right now that is 10 million tons, and about eight million of that is under long-term contracts. Henry Hub plus a fixed liquefaction fee.

So that capacity will be coming into the market, but most of it is dedicated to end users like Poland and Portugal. But some of it is going to merchant players like Shell and BP. So, it is important to realize that when a terminal is fully contracted, the output still could go into the spot market in the global LNG space.

I mentioned LNG Canada, Venture Global. Another big one that’s really going to have an impact on the market is Golden Pass. Golden Pass is 18 million tons of capacity that’s looking for a home. Only because it’s Qatar Petroleum and Exxon can they take that kind of financial commitment without having downstream contracts. But that’s 18 million tons coming on in the next few years that really will move the needle.

MR. DANIEL SHERWOOD: Yeah. So, you talk about these long-term contracts being like the security that can bring these projects to fruition, but also with the caveat that these big contracts aren’t always going straight to the end user and can end up on the spot market. So, when you say that, it makes me think that if LNG prices remain high, it would increase the likelihood of whether it’s accelerating the construction timeline as much as you can, which obviously they’re going to do anyway. But especially for ones that aren’t necessarily in development and are looking for FID, it

seems like it would increase the likelihood of someone wanting to contract that out if they say, hey, look at these prices. This is going to be good exposure. Is that a good analysis? Or is that not necessarily the case because they think that this might all just come down and they can contract at a better time?

MR. BRAD WILLIAMS: Hey, another good question. And that’s why I always like talking to you. You have to realize, although we’re at $30, $29 an MMBtu for JKM and TTF for the winter, in January, February, and March, we do see that price drop back down to about $16 in April for the futures market. So again, people get euphoric thinking about $30 LNG prices, but that is a short-term winter spike and would not expect those super high prices to persist on.

There’s a lot of new LNG coming into the marketplace over the next couple of years. So, it is a true supply and demand market. You’ve got a lot of new markets in the world. We’re seeing some of the kind of ‘secondary buyers’ influencing the market right now. You think about Latin America, Brazil, Chile, the Middle East, South Asia, Bangladesh, they’re all taking more LNG than they traditionally have averaged, and that works out to about seven million tons of new load.

So, these are the kind of things that influence the price in the short term for spot. But remember, most of the LNG in the world is contracted long-term, either indexed to Henry Hub, plus a fixed liquefaction fee, or to a percentage of Brent. So, with Brent today at $75, 11 percent index would be a delivered price of LNG of $8.25. So even though the spot price is at $30, the long-term contract is at $8.25. You think about U.S. sales, $3 for liquefaction, $.40 cents for pipeline, $1.90 for shipping to Asia, gets you to about $5.30 delivery. And then you add gas costs on top of that, you’re about $7.90-$8.00 delivered to Asia from the Gulf Coast.

The long-term contracts versus spot is something that the LNG terminal developers have to live with. And just as high prices would want to make a merchant have more capacity, it does have that negative effect on the buy side. Because they’re concerned that they’re going to see super high LNG prices. It makes them reconsider moving away from coal or heavy fuel oil.

MR. DANIEL SHERWOOD: That’s an interesting point.

MR. BRAD WILLIAMS: Yes, trying to answer the question specifically, I think in the U.S., high prices like this help motivate merchant players to take capacity. But people have long memories in the oil and gas industry, and they know that just last year U.S. exports were 4 Bcf a day and the global price was $4. So, you made no money last year, and this year you’re making a windfall. Stability is what helps get a $10 billion plant built. Not volatility.

MR. DANIEL SHERWOOD: There you go. Put that quote in the air on one of those little aircraft. That’s great and makes sense. That one point — maybe I’m reading too many industry trade rags, but that one point you made is one that I’ve not really come across, that some of the customers who have been contributing to precisely what you talk about, this increased demand in what’s considered not necessarily the principal markets, Brazil or Bangladesh, customers on that side, they might be dissuaded from this volatility to think. Which brings up another interesting point, probably maybe too granular for the purposes of this discussion, but this debate of whether or not to tie your LNG contract to Brent or Henry Hub. And I remember seeing something in Japan, how their contracts hedged against this volatility and have insulated its electricity markets. There are so many different things at play, and I feel that oftentimes when people kind of make these conclusions of, oh yeah, now we’re going to be contracting out more, it’s not really giving enough respect or enough attention to the nuance.

MR. BRAD WILLIAMS: Yes, and you are correct. It is a double-edged sword. You know, high prices that help a terminal developer will give a big buyer some pause. But that’s why a big buyer wants to have a hedged portfolio. And that’s why they look to lock in a fixed liquefaction fee. A lot of buyers like Poland and Portugal and others from the U.S., they see that U.S. natural gas is probably more stable than global crude oil. So, if you locked in a contract at $2.50 for liquefaction you know what your shipping cost is. You can hedge Henry Hub price risk. You can hedge that for 15 years and you’ve got a very nice, stable, long-term LNG supply. A merchant who’s out there playing the spot market, he sees $30 today. But he’s looking at $15 come April, May, June, July of next year, and he’s got to remember it was $4 last summer. Volatility is something that has to be looked at from all angles.


MR. BRAD WILLIAMS: Let me just mention, Daniel, something else that’s impacting prices. China really has taken global warming to heart. And demand in China is up, and there is a lot of LNG moving that way. And LNG competes favorably to pipeline gas into China. But Europe is really also seeing an anomaly with low storage inventories. Europe and the U.S. have to put a lot of natural gas in the ground so that they can meet their winter daily peak demand. Well, in the United States, that capacity is typically owned by gas marketers/traders. And they’re anxious to put that gas in the ground because they know the highest price is going to be in the winter.

Europe is similar but different. The largest holder of underground storage capacity in Europe is Gazprom, one of the largest gas importers into Europe. And now you’ve got an interesting dichotomy where Gazprom has been slow to fill that underground storage. So the local distribution companies and buyers of natural gas, they look at those rates and they’re concerned that there could

be a gas shortage, a physical shortage, this winter. And that’s another thing driving spot prices as people scramble to have LNG in place.

MR. DANIEL SHERWOOD: Yeah, and the geopolitical element of Russia and storage is fascinating seeing the IEA and other entities in the EU calling for more transparency and accusing them of rigging the market. But then you also see, well, I’ve seen a lot of conflicting information about that, about Russia’s ability to send gas. So, I don’t know. Would you agree that there is at least a prelude to a bit of an energy crisis in the EU right now, I mean, with prices and outages? Or do you think it’s more just in the media? Do you feel comfortable positing about that?

MR. BRAD WILLIAMS: Well, the prices in Europe are the price. I mean, that’s the good thing about an open and transparent market. TTF and the National Balancing Point in the U.K., that’s a very public, open, transparent index. Remember, though, TTF is not an LNG index. It’s like Henry Hub. It’s a natural gas price index. And then there’s a basis adjustment to translate that into an LNG price. But there were also some unscheduled maintenance outages from gas from the North Sea. So maybe it’s just kind of a culmination of some bad consequences. But remember, Russia’s in business to make money from their imports and they will maximize deliveries into Europe. I don’t think we would be in a crisis, but we are certainly seeing high spot prices. But remember, most of the LNG going into Europe is under long-term fixed price; I say fixed price I mean oil index prices. The spot price is at $30, but the oil based contract that price is at $8.50.

MR. DANIEL SHERWOOD: So, we have all this volatility in the market right now, all over the place. And then back home, we have operators trying to advance their projects. I think it’d be advantageous to our listeners to walk through some of them. You’ve mentioned some, but I consider this to be one of your fortes and it’s hard to keep your finger on the pulse of all these projects. And I think it’s most fitting to start with Golden Pass. You mentioned that one. It’s the monster of all of them, I think 18 million tons. Or 15. But where are we in the process there? Construction’s advancing and it’s going to be online next year?

MR. BRAD WILLIAMS: Yeah, Golden Pass is a good one because it is all merchant capacity. It will be potentially sold to actual end users, maybe in Europe or South America. But right now, that is all available looking for a home. All these development projects are all competing against each other as they look for long-term secure contracts so they can get financing.

So, you’ve got Golden Pass that’s in construction. It’s going to come online in 2024, late 2024. It’s on schedule. We’ll say on budget. And it was originally to be 15 million tons, but they actually upped their export capacity to 18 million tons. And the difference there is what we call nameplate capacity of a train versus max design capable capacity.

And in theory, they would probably count on having 15 million pounds a year available. But theoretically, the plant can produce 18. And you see companies all the time, they’ll say, oh, I’m making 18 million tons because that lowers their unit cost in the marketplace. So there’s that gamesmanship always going on.

So the new projects, is what we’re looking at. You think about a project like NextDecade’s, or Tellurian’s, or Texas LNG. These are all the guys trying to secure contracts so that they can get the security they need, to get the financing, to get these new projects built. NextDecade is out talking to people trying to get long-term contracts.

Venture Global was successful in getting most of the capacity at their Calcasieu projects sold. Its 10 million at capacity. They’ve got about eight million under long-term contracts. Some of that at really low prices, which makes the buyer, BP and Shell happy, but maybe not so much for the shareholder return of Venture Global. But they’ve done a good job. They’re on time. They’re on budget for that project.

Venture Global has another project south of New Orleans called Plaquemines, which is scheduled to be 10 million tons, or even up to 20. And they’ve only gotten about three or four million tons under contract, and that’s not enough to get them financing.

So, all of these guys are competing against each other in the market to secure long-term contracts. But there are other players. The expansion of Cameron, the expansion at Freeport. These are also projects that will be lower cost because they are part of an existing facility. It’s a real cat fight in the U.S. export market for the development projects.

Tellurian has tried a lot of innovative paths to try and sell LNG. They haven’t gotten there yet, but they have signed some contracts that are on a netback to TTF – Euro prices – and Asian prices of JKM. The difficulty there is that really doesn’t create financial security for a lender. And Tellurian says, well, wait a minute. We’re going to go out and secure all our own reserves so that we can backstop that index volatility. But so far, they have not announced having five Tcf of proven gas reserves. And so their goal to make an FID by the end of the year is really tied to their ability to lock up five Tcf of gas, which seems like a long putt. But companies surprise us all the time. And let’s hope that they can have success. I actually did a report recently —

MR. DANIEL SHERWOOD: Well, Brad, let me stop you there for a second. I want to plug your report. But you mentioned a number of things there, on just the nature of the contracts not necessarily encouraging a lender, but then also the proved reserves. I think those are two really important points to hit and ones that you discussed in the report you’re mentioning that you wrote

with IEEFA, along with Clark Williams-Derry. And both Brad and Clark did this superb analysis, reviewing the history of the company and Charif Souki, the CEO of Tellurian and his track record and future development plans.

So, I want to revisit that. And I also, just for our listeners, want to highlight the differentiation of what Brad was saying before. He is talking about on the one end, projects that are under construction and commissioned that they know that they have someone on the other end buying the capacity. And then this other pool of projects that are going and knocking on the same doors and advertising these millions of tons of capacity that they’re hoping to get shored up and Tellurian falls in that second part with their Driftwood project. Is that right, Brad?

MR. BRAD WILLIAMS: Yeah, you’re on the mark. There’s a whole group of players, call it a horse race. You’ve got a number of horses, Tellurian, Commonwealth, all of these projects out in the marketplace, selling or trying to sell long-term LNG. And it really is a horse race on who can secure the contracts to get the financing. The Venture Global Plaquemines project. You still have the Lake Charles import terminal that Energy Transfer has been trying to market as an export terminal. All of these are in that proverbial horse race.

MR. DANIEL SHERWOOD: Thank you. So, with Driftwood, that’s the Tellurian project. You mentioned two things that I think are relatively esoteric. I’d like to unpack them. If not for me reading your report with IEEFA, I don’t think I would follow.

Can you unpack why the contract, you said, that is tied to TTF Euro prices, and a netback to JKM? I mean, that alone is complicated, so JKM is the Japanese/Korea spot LNG Index. TTF is natural gas. Is that out of Netherlands, I think?

MR. BRAD WILLIAMS: Yeah, it’s the Netherlands. Yeah, TFF is the Dutch price index for natural gas. So think of it as the Henry Hub marker for prices in the Netherlands. And then people use that as a liquid pricing point, just like we use Henry Hub in the United States. Henry Hub is in South Louisiana. So, there’s always a basis depending on where you are. Gas in the Marcellus is typically at Henry Hub minus 60 or 70 cents. Up to Canada would be more than a dollar discount to Henry Hub.

So back to your question, Tellurian’s advertised low prices, so they’ve got 11 million tons of capacity. They’ve signed three contracts for three million tons, which sounds great. But it’s not at a fixed price. So there’s not a stable cash flow that a lender can count on. What they’re doing is selling LNG based on the JKM price in Asia, the TTF price in Europe. And the buyer, in essence, is netting back. So today, that number would look great because you’ve got $29 minus, I’d call it $2 shipping, means that there’s lots of money for Tellurian to benefit in their liquefaction charge. The difficulty

is when that price collapses like we saw last year. If the JKM price is $4 minus $2 for shipping, minus the cost of Henry Hub Gas and even $2, means there’s nothing left for the liquefaction terminal.

Now, one way to offset that risk, Daniel, is if you own the reserves and, in essence, you could backstop that index price. And that’s what Tellurian is trying to do. They just have not announced yet that they’ve secured all of that gas supply or how they’ll get that gas supply from the Haynesville down to Lake Charles because they canceled the pipeline they had proposed.

MR. DANIEL SHERWOOD: Right. Which is also a capital-intensive project.

MR. BRAD WILLIAMS: Does that help?

MR. DANIEL SHERWOOD: Yes. And you actually answered the two inbound questions that we had. So yeah, very helpful. And yes, then getting into that second bit here just quickly, you just touched on it. Or maybe I can just add my own color. This Tellurian production aspect is fascinating because it’s a huge amount of capacity that they’re trying to produce out of the Haynesville, which is a prolific natural gas reservoir. And the economics don’t need to make as much sense for an operator like Tellurian as it would for someone like Indigo or something like that because they’re selling it directly to their own customer. But I think it was just two weeks ago or three weeks ago, they announced their new drilling plans. And the daily net output was something like five to ten percent of the amount of reserves that they would need to satisfy their plan. So yes, there’s a lot. There’s just a big gap there. Not that they can’t make that up, but it’ll be interesting to watch how they will.

MR. BRAD WILLIAMS: Yeah, and what you’re talking about is the reserve position. But they need 1.5 Bcf a day of capacity, deliverability, for 10 or 15 years. It’s a massive amount of natural gas. And they want to have the contracts in place before they make FID. That’s a really, really steep mountain to climb.

MR. DANIEL SHERWOOD: Interesting. Well, something I know that you’ll be watching, and for our listeners, I’ll link Brad’s report into the transcript so you can click through it [link]. It’s a lengthy read, but it’s worth the time.

All right, so we’ve already had 35 minutes. I have a couple of other questions I wanted to ask about some of these similar projects to Driftwood like Port Arthur, but I’m just going to bike rack it and maybe we’ll get back to it in questions. But I wanted to get to a couple of other questions we’ve gotten. Sorry, I’m hopping around a little bit. But before I move onto questions and answers, I have

to bring up New Fortress. It’s a company that our readers know well. And one that, for our readers, also know Brad because Brad’s helped lend his insight which is featured in our reporting.

The reason I wanted to bring up New Fortress is because it’s just a slightly different operator in the space. Today, we’ve been focusing mostly on LNG producers whereas I consider New Fortress to be an LNG shipper. And you mentioned this in the beginning, but I was hoping that you could give us a little bit of insight as to how you’d think that the spot market is impacting them now. And for those of us who aren’t familiar, their operations are exclusively in Latin America right now. So, they’re not worrying about sending molecules across the ocean. But sometimes, as Brad has monitored, they bring molecules in from across the ocean. So, with all this volatility and changes in prices, what does that mean? How do people at New Fortress react to this?

MR. BRAD WILLIAMS: Yeah, New Fortress is quite an interesting player in the marketplace. And kudos to the team at New Fortress for getting assets on the ground. We’re not sure, as we analyze the economics and the finances, if they’re making any money on all of this. But they are moving LNG into Jamaica, into Puerto Rico, now into Cabo, into Mexico. But as you say, they’re really an LNG distributor, a logistics company. And the problem with that is that the cost of handling LNG is so high.

New Fortress also has a bit of a bumpy road because they don’t necessarily dotting all the T’s and cross all the I’s with permitting. They had a problem in Puerto Rico. There’s still an ongoing issue with FERC there. But they have been successful at moving volume. But you think about Jamaica, they’ve got two full-size LNG carriers sitting offshore Jamaica, and they’re moving very small quantities. That means their unit cost is very high.

While they can represent that they’ve got a fantastic growth percentage-wise, when you look at the actual cubic meters delivered, it’s very, very small and the cost of that is very high. Just like their new plant in Cabo, it’s a small facility and their scheme is to move bulk LNG in a big ship and then put it in ISO containers that get moved to shore and then trucked inland. And that’s an effective way to distribute LNG. The bad news is it’s very expensive, especially when you’ve got 145,000 cubic meter vessel sitting off Cabo at $60,000 a day.

So, there is a lot going on in New Fortress. They’ve taken the next big step by entering the Brazilian market, which is a big power market and big LNG imports which is a giant step forward. And we have seen a lot of other people fail trying to do energy imports into Brazil for power. Time will tell if New Fortress can be successful and actually make money.

MR. DANIEL SHERWOOD: Yeah, another interesting thing to watch.

MR. BRAD WILLIAMS: How about that for a long-winded answer?

MR. DANIEL SHERWOOD: I think you nailed it. And I also wanted to just add, The Capitol Forum has visited the plant in Pichalingue, or Cabo as you say. And despite the fits and starts on the construction side, the plant is almost done because there’s an onsite plant that they’re buildingis almost done. But I think it’s worth highlighting that that’s a merchant plant. So those electrons that they generate will have to be competing with those that have contracted the CFE, the government entity down there. So yes, with New Fortress, it’s always interesting. They have such a novel, well, relatively novel, model. Especially now, I’m excited to see what comes of this floating liquefaction facility and production facility that they’re trying to develop. Do you have anything in conclusion with New Fortress? Otherwise, I’m going to move onto some of the questions we’ve got here. I think I’ve filtered out some good ones.

MR. BRAD WILLIAMS: Let’s just say we’ll watch New Fortress, and we’ll wish them good luck. And let’s have a question.

MR. DANIEL SHERWOOD: Yes, yes, best of luck. This is an interesting one, and one that you and I hadn’t necessarily discussed beforehand. But people have been watching it and definitely it came across my desk as well some of the manufacturing shut-ins and industrial shut-ins abroad due to mostly high prices of natural gas. I saw an ammonia plant, I think, in the U.K. This person cited another type of manufacturing plant. So we’re wondering, is there, do you have a good enough finger on the beat of whether or not this is something we might foresee here in the U.S.? Or do we have enough of a stable domestic supply that a manufacturing shutdown in Pittsburgh, for instance, seems unlikely? I mean, storage inventory levels domestically I know are low. But do you have any insight into that?

MR. BRAD WILLIAMS: Yeah, natural gas at $5, I think, is a bit of an anomaly right now. Domestic production is very strong. We’ve got stable demand. So, people ask why is the price at five dollars? Well, part of that is carried by speculators as they look at LNG prices around the world and other commodities. But the U.S. has got lots and lots of reserves and deliverability, and the pipeline capacity already in place to serve 90 or 100 Bcf a day of domestic load. Gas production producers make really good money at $3 MMBtu. Now, that being said, producers in the U.S. have good memories, as do the bankers, and they say, hey, look, we remember gas below $2 not too long ago. So even though gas is at $5 today, we’re not going to rush out and put a thousand new rigs in the field, drilling holes to add deliverability.

The U.S. pretty much had a nice balance point between demand and available supply. And I think you’ll see prices come down from $5. Plants around the world, like fertilizer plants in the UK are temporarily closed because of the high prices. In the United States, we don’t make a whole lot of

fertilizer other than for the domestic market. We import a lot of fertilizer from South America and other places and Trinidad.


MR. BRAD WILLIAMS: Yeah, if you saw sustained prices at about $5 or $6 next May, June, I think then you start to have an impact. But I think you’ll see prices come back down as you exit the winter, January, February. I think you’ll see prices soften, just like the futures for TTF and JKM go down from $30 to $15/MMBtu.

MR. DANIEL SHERWOOD: Right, right. Good. I understand that your crystal ball is just as good as anybody else’s. But yeah, it sounds like there’s reason to believe that we have enough supply, ability to deliver, so on and so forth. That’s a good point too. Our industrial consumption domestically isn’t as intense. Okay. I’ve got another one about Cheniere, which we didn’t talk about much. I’m not even sure, did we hit on the Train 6 commissioning? But kind of just what the question is, what makes Cheniere the favorite student in class? And there’s good info about that online. But would you be able to give us a quick nutshell as to how they successfully exported LNG out of the Gulf in a way that seems to be better than peers or at least before peers?

MR. BRAD WILLIAMS: Yeah, and let’s just say that Train 6, as well as Train 3 over at Corpus Christi, are coming close to completion. Most of that capacity is contracted long-term to end users, utilities and other buyers. So that provided the long-term stability to get the financing, to get those projects built.

What makes them the favorite student in the class is that an expansion of an existing facility is at least 35 percent cheaper than a new greenfield facility.

So, you think about expanding Sabine Pass, expanding Corpus. Those were cheaper alternatives so they could put a better product, a cheaper product, in front of global buyers. Plus, they’re a proven commodity. Cheniere has done a great job at performing. And they are very good, very safe, and they meet their contract obligations. They also allow some flexibility in their contracts, allowing buyers to turn back cargoes like they did in 2020. They are giving the market flexibility at a decent price.

A new build project like Commonwealth or Next Decade or Tellurian’s Driftwood, they have to overcome that price hurdle. And that’s where Exxon and QP just bit the bullet and said, well, we’re going to build Golden Pass. And it’ll get sold when it gets sold. These kind of market forces are what inhibit new projects. And just to finish, you think about a fully permitted expansion at

Cameron for another train, another fully permitted train at Freeport, that’s the low hanging, low-cost fruit that a new project, a new greenfield project, has to compete against.

MR. DANIEL SHERWOOD: Right, right. And a good parallel there too with Golden Pass. Well, we have surpassed our 45 minutes. There’s only two questions here that I didn’t really fold into our interview, and I don’t want to keep people for too long. I can always forward an email along to Brad. I’m lucky enough that Brad keeps in touch with me. I can see if we can lean on his expertise following this. You and I, we never got to talk about Sempra. But I guess we’ll just — to be continued. And for anybody sweating bullets on the other end of the phone, if you’re trying to keep up with notes, I’ll remind you one more time that we’ll be sending out a transcript. So don’t worry, we’ve got a lot of great numbers and great specific information here.

Brad, I thank you again for your time. And we really, really appreciate it. Just waking up every morning and trying to make hay of all these movements has been overwhelming at the least. So, you’re a big help.

MR. BRAD WILLIAMS: Well, thanks. And thank you to The Capitol Forum for helping communicate facts into the market.

MR. DANIEL SHERWOOD: We appreciate that. I hope everyone enjoyed this as much as I did and feel free to reach out. If you’d like me to introduce you to Mr. Williams, he’s as entertaining as he is intelligent. So, I hope you guys all have a great day and thank you again for joining us.

MR. BRAD WILLIAMS: Thank you, Daniel. Goodbye to everybody.