Williams sees expansion of its natural gas pipeline business to feed growing LNG export demand as the best way to drive future growth, rather than building its own terminal as some of its competitors are doing or again trying to sell the company, CEO Alan Armstrong said December 19.
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Related factbox: No looking back for Williams CEO
The pipeline operator believes that as long as gas prices stay low, LNG will remain cheap to produce in the US, making it economical for export developers that are struggling to secure long-term offtake contracts to proceed with their projects.
Even without the second wave LNG terminals advancing, Williams has connectivity to several of the facilities currently in operation or under construction, its gathering operations have surged with more drilling by producers, and it is able to move more gas southward from Northeast shale plays thanks to infrastructure expansions.
That's a recipe for sticking to fundamentals on a standalone basis, Armstrong said in an interview with S&P Global Platts at Williams' headquarters in Tulsa.
"I would say we keep our eyes open to know where the market is, but we have such a strong growth trajectory developing the assets that we do have that we are not going to let anything get in the way of that," Armstrong said. He said a buyout or major acquisition is "not an important topic within the board room."
How things have changed in the 18 months since six directors quit over an unsuccessful effort to remove Armstrong after a $33 billion combination with Energy Transfer Equity fell apart.
ETE owns the general partner of pipeline operator Energy Transfer Partners. Since then, Williams has reconstructed its board, sold its majority stake in a Louisiana olefins plant, and refocused its efforts largely on natural gas, with additional projects in the development stage.
It hopes to capitalize on expected demand growth from US liquefaction terminals, which chill dry gas into LNG so it can be loaded onto tankers for export, and increased pipeline flows to Mexico, where gas is used as a fuel for power generation.
While some other gas pipeline operators have pursued developing LNG export projects of their own, such as Dominion Energy, ETP and Kinder Morgan, Williams believes gathering, processing and transportation provide the best returns, and it doesn't want to mess with that formula, Armstrong said.
"The risk of timelines associated with developing those projects is so big," he said. "From our perspective, the returns don't hold up very well to the risk."
Armstrong said Williams has an option to invest in Pembina Pipeline's Jordan Cove LNG export project in Oregon, though he sounded lukewarm to the possibility the company might exercise that option in the near term.
Asked why the pipeline competition is jumping into LNG, Armstrong said bluntly, "Because they just don't have the same opportunities that we do. That's very evident to us." Williams sees the Northeast as that land of opportunity.
"We have a little over a third of that gathering up there today," Armstrong said. "In the rich gas plays, obviously, that will come and go as NGL margins are stronger. And right now, they're enjoying some pretty nice margins in the area."
Gas takeaway projects, including the Atlantic Sunrise expansion of Williams' Transcontinental Gas Pipe Line, are moving forward, meanwhile.
Williams faces continued state permitting challenges with Constitution Pipeline, but Armstrong said he is confident the operator will eventually be able to move forward.
As for his future, Armstrong will reach 32 years at Williams next month, the last seven as CEO.
Asked where he sees himself five years, about all Armstrong would say is that he is unlikely to be at another company.
The 55-year-old has no plans to retire, though he said Williams has discussed a succession plan, a move that would not be unusual for a company of Williams' size.
If there is anything that worries Armstrong, it is the US regulatory environment, in general, and how protests by environmental groups may delay future pipeline projects, which could affect gas producers' output targets, and thus impact flows on Williams' pipelines.
Gas, he said, plays an important role in allowing for increasing use of renewables because it compensates for the intermittency of the sun and wind.
"What I don't understand is the intense conflict around somebody having to be a winner and somebody having to be a loser," Armstrong said. "It's very surprising to me that people are so short-sighted about the benefits of gas."
The CEO said renewables have their place, too, but he isn't worried about the impact of changing national attitudes from the push among some constituencies in California to get to 100% renewables for power generation statewide in the next several decades.
"It mostly just reinforces my notion that I should tell my kids not to live there because it's going to be too expensive to live there," Armstrong said.
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