Page 5 - NorthAmOil Week 10 2021

NorthAmOil COMMENTARY NorthAmOil

to many others in the industry by designing a owned Freeport LNG’s chairman and CEO,
smaller plant that could still capture the bene- Michael Smith, noted the need for security
fits of scale without becoming overwhelmed by of supply in a balanced portfolio, which has
costs. become more apparent following the winter
“We took the scale down, so while big enough price spike in Asia.
to get benefits from scale, [it was] small enough “I think last year proved one thing, that
that you could push the process system fabri- there’s been an over-reliance on spot cargoes in
cation into batteries, get traditional factory our industry,” Smith said. “The spot cargoes are
benefits by doing that, benefits in terms of here to stay. They’re great. It helps the diversity
lower costs and lower risk from also bringing of supply, but if you’re a utility and security of
the scale down,” he said. “What came out of the supply is the most important thing, you just
factories had to be small enough that you could need some long-term contracts,” he continued.
transport it complete to site and plug it in,” Sabel “In a balanced portfolio, you can’t just live on
added, saying this allowed Venture Global to spot. And I think that’s what this year showed
avoid more expensive construction of the type and we’re seeing interest again in long-term
required by many other global facilities. contracts for our Train 4 because of it,” Smith
The company’s modular approach means said, adding that he believed that others will see
Calcasieu Pass LNG consists of 18 small-scale similar interest in long-term contracts too. There are just
trains in total, of which the fifth has just been This trend bodes well both for existing pro-
plugged in, according to Sabel. The seventh and ducers such as Freeport that wish to expand over 40 countries
eighth trains will be plugged in over the next few their liquefaction capacity, and new players that use LNG
weeks, he said. that are still targeting final investment decisions
With this modular approach, a lot of costs and (FIDs) on their first export terminal. Cheniere’s currently, and
aspects of construction were shifted into a fac- Fusco also sounded an optimistic note over
tory environment. “From an on-site perspective, demand for US LNG over the coming years. Cheniere expects
from a construction risk perspective, relative to “We see huge demand growth potential in
other US projects of our size, you have dramati- Asia right now,” he said, citing China’s electri- that this will
cally lower labour on-site as a result,” Sabel said. fication plan, which involves increasing natural “rapidly” climb to
“Instead of 13,000 people for 3-4 years at peak gas-fired combined-cycle power generation, as
on your construction site, our peak’s around a major driver. “If they’re successful, that could over 60.
3,000 people, and in fact we’re already starting be three more Chenieres,” he said. “The demand
to come down off peak here next month.” This is phenomenal for the product.”
reduces risk as well as cost, he explained. According to Fusco, there are just over 40
countries that use LNG currently, and Cheniere
What next? expects that this will “rapidly” climb to over
Venture Global’s approach differs from 60. If this plays out, demand trends will work
Cheniere’s, but both companies sounded opti- in LNG producers’ favour – in the US and else-
mistic about their prospects, as did other LNG where – as they sanction and build the next
players represented at CERAWeek. Privately wave of liquefaction capacity.™

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