INTERVIEW: US' Cheniere sees LNG growth from Asia's 'three pillars' of demand

The US' largest LNG producer, Cheniere Energy, sees the industry's growth as coming from the "three pillars of South Asia, Southeast Asia and China" with Japan also "a fairly stable market," supported by expected power demand from large data centers in the country, Anatol Feygin, executive vice president and chief commercial officer, told S&P Global Commodity Insights.

"That's going to be the opportunity to supply that -- those growing markets," Feygin said during an Oct. 7 interview on the sidelines of the general assembly of the International Group of Liquefied Natural Gas Importers, or GIIGNL, in Hiroshima.

"I think it is incumbent on the buyer to be comfortable that the Henry Hub price will continue to be relatively stable and relatively low," Feygin said. "The rest we have shown that we can control costs on our side and deliver a reliable and economically competitive product."

Feygin added that he sees healthy discussions across the board.

"Of course, number one, we do expect that the driver of demand growth for the LNG markets overall will be Asia," he said, adding that Japan would not be a big growth market, though it would remain a stable market.

"We expect that the advent of increased power demand for things like large data centers will help that," Feygin said, with regard to Japanese demand. "And of course, as a very large market that is mature, there is always the opportunity as legacy contracts expire to enter the market and find an attractive solution."

With a track record of never missing "a foundation customer cargo" with its operational safety and reliability, Feygin said: "Those are all things that should enable us to find the right opportunities in Japan as well as the rest of Asia."

Long-term contracts

Feygin said that despite the market's interest in short-term LNG supply, Cheniere is keeping its focus on long-term supply contracts for its LNG marketing activities.

"There is definitely an appetite on the buyer side for shorter-term contracts," he said. "But that's not a business that we are interested in, and so when I talk about our healthy interactions and commercial discussions, that simply doesn't include the buyers that are focused on short- or medium-term contracts, and that is the business that we leave for others to supply."

As an infrastructure company, Feygin said that Cheniere's infrastructure solutions are backed by multi-decade offtake contracts.

"As a guideline for ourselves, we are no less than 90% contracted," he said. "And really through the balance of this decade and through the middle of next decade, we are about 95% contracted."

In terms of contract tenor, Feygin said that "the average remaining life...of the contracts we have now is about 17 years."

"And the contracts that we have been signing recently on average are around 20 years, some of them shorter, some a little bit longer," he added.

Asked to comment on how US projects are competing with oil-linked Qatari contracts for Asian markets, Feygin said: "I really don't view us as competing with the Qatari projects... I don't find that the buyers with whom we are engaged are thinking about a Henry Hub indexed product from Cheniere with its destination flexibility and other attributes or a delivered product on a Brent slope from QE (QatarEnergy)."

"I find that buyers typically are interested in one or the other in a portfolio construction that they have decided on and diversification strategy that they have decided on," he said. "I do think that QE is an incredibly capable and reliable market participant, and it is a foundational component of this market."

Winter outlook

As for this winter, LNG markets are expected to be "quite balanced" with "quite healthy" inventories in Europe, Feygin said.

"In a normal winter, I think it will be a situation where price will allocate the marginal cargoes to the market of most need."

"We've seen now, of course, not only Egypt, but also Latin America become a marginally stronger buyer in the current conditions," he said.

With little additional supply coming to market in 2024 and 2025, "markets will continue to be in a condition where a small disruption will have a meaningful impact on the economics," Feygin added.

Cheniere operates the Sabine Pass LNG export terminal in Louisiana and the Corpus Christi LNG export facility in Texas, with a combined capacity of about 45 million metric tons per year. The company is building a 10 MMt/year expansion of the Corpus Christi plant that its executives have said is on track to start LNG production by the end of 2024. The project, which entails adding seven midscale liquefaction trains, is expected to be fully online by the end of 2026.

Asked to comment on whether Cheniere is still on track to start production from its Corpus Christi expansion, Feygin said: "We still expect first LNG from Stage 3 at Corpus Christi by the end of the year."