Cheniere confident US LNG permitting freeze will not thwart expansion plans

Cheniere does not see the White House suspension on key LNG export permits hindering its growth plans, even though both of the proposed expansions at its terminals in Texas and Louisiana will require approvals that are subject to the freeze.

Instead, the country's top LNG exporter said it expects to receive the permits it needs from the US Department of Energy in time to reach its targeted final investment decisions on the projects: a more than 3 million mt/year expansion of its Corpus Christi plant and a larger, roughly 20 million mt/year expansion of its flagship Sabine Pass terminal. The exporter maintained its targets for an FID on the Corpus Christi project in 2025, followed by an FID on the expansion of the Louisiana facility in 2026.

"To be clear, the DOE action has not slowed down our expansion projects at either site," Cheniere CEO Jack Fusco said during a Feb. 22 earnings call. "We are full steam ahead."

Cheniere's comments Feb. 22 amounted to a show of confidence that the permitting holdup will not be long-lived or morph into a more expansive ban on new LNG exports from the US. At the same time, the permitting hold "does introduce regulatory and permitting uncertainty into the US LNG industry as a whole," Fusco said, adding that a "fair and transparent regulatory framework" is essential for developing natural gas infrastructure in the US, particularly complex multi-billion-dollar LNG projects that take years to develop.

"While I think this is politically motivated, I'm hopeful that at the end of the day, we go back to where we were before, which is: We let the market dictate which projects will survive and which ones won't," Fusco said.

Non-FTA permits

The permits at issue authorize LNG exports to countries that lack free trade agreements with the US, and they are critical for major LNG projects to advance because these countries represent most of the global LNG import market. The White House announced what it billed as a "pause" on the non-FTA approvals Jan. 26, saying it will last until the agency can update how it considers impacts of LNG exports on climate change, the US economy, and national security.

Sector experts say the impact of the election-year permitting freeze will largely depend on its duration, which is uncertain, and on any new criteria that the DOE establishes for considering the approvals, which is unknown.

While the suspension is widely expected to last at least until the November presidential election, the DOE has not specified a timeframe for the policy review.

"We are confident that Cheniere will be able to navigate whatever comes out of the DOE and continue to prosecute expansions on our timeline," Cheniere Chief Commercial Officer Anatol Feygin said during the earnings call.

Executives said Cheniere had been through two previous DOE studies examining whether US LNG exports are in the public interest, and they believe the new study will reach the same conclusion, finding that exports support long-term energy security, climate goals, low and stable US natural gas prices, and domestic economic benefits.

"Global energy markets are calling for additional LNG supply," Fusco said. "The US is significantly advantaged to answer this call with our abundant and low-cost natural resources, flexibility and affordability of US volumes, and, until recently, the reliability and certainty of the US regulatory regime."

Expansion projects

Despite requiring permits subject to the freeze, Cheniere's proposed expansions are further out than the projects most acutely impacted by the permitting hold, which are those without the approvals that have been targeting FIDs as soon as this year.

Neither of the Cheniere projects is ripe for a DOE decision on non-FTA permit. The Corpus Christi expansion is in the early stages of a separate permitting process at the US Federal Energy Regulatory Commission for authorization to construct the project. The DOE typically acts on non-FTA approvals following a FERC decision.

Cheniere's proposed Sabine Pass expansion is in a pre-filing review at FERC, with the developer saying it expects to submit a full application by the end of March.

Cheniere is already building a 10 million mt/year midscale expansion at Corpus Christi LNG, and executives Feb. 22 said that project remains on track to start producing LNG by the end of 2024. The project is more than 50% complete, Cheniere said.

Cheniere on Feb. 22 reported net income of $1.4 billion for the fourth quarter of 2023, compared with about $3.9 billion reported for the same period of 2022.

Cheniere attributed the unfavorable change primarily to changes in the fair value of its derivative portfolio. Cheniere uses derivatives to hedge its exposure to commodity markets in which it has contracts to purchase or sell physical LNG. If prices rise or fall, Cheniere must account for the mark-to-market gain or loss between the derivative and physical positions.