Speaker Q&A Series – Kathleen Eisbrenner, Founder, Chairman and CEO of NextDecade Corporation
With the North American Gas Forum approaching, The Energy Dialogues team is running a Speaker Q&A Series to bring first-hand content from our speakers to our network.
We had the opportunity to speak with Kathleen Eisbrenner, Founder, Chairman and CEO of NextDecade Corporation, shortly after NextDecade LLC merged with Harmony Merger Corp, becoming the newly public liquefied natural gas company NextDecade Corporation.
Q: How will LNG change the gas industry in the US and global markets?
A: Natural gas, particularly as LNG, is increasingly becoming more important in the global marketplace with the advent of US LNG exports creating a fresh driving force and a catalyst for marketplace innovation. US oil and gas production growth over the last decade has resulted in a saturation of the domestic market leading to a dramatic fall in prices, encouraging producers to look for new avenues to access international markets via LNG exports and simultaneously attracting customers seeking competitive supplies.
This transformation in the US is aided by significant recent and expected increases in global LNG demand, underpinned both by growth from traditional buyers and by the relatively recent increase in new and emerging import markets. Today 39 countries are importing LNG up from only 11 in 2000, and with additional import infrastructure on the rise predominantly by means of FSRUs, that number looks set to continue its upward momentum in the coming years.
On the commercial side, traditionally, the LNG industry has been founded on oil-linked pricing, which has worked for both buyers and sellers, but as the industry’s grown, I think the opportunity to diversify pricing has been something that both customers and suppliers are interested in. While there’s clearly a continued interest in oil-linked contracts, we believe access to other indexes such as low-cost Henry Hub index is going to continue to facilitate growth in market share.
Lastly, diminishing resources in historically abundant LNG markets, as well as expiring contracts (not necessarily re-contracting with existing providers) in an array of jurisdictions, further increases the desire among LNG buyers and importers to diversify their supply with reliable and cost-effective solutions, including those from new sources along the U.S. Gulf Coast.
As a result, low-cost U.S. LNG is poised to capture market share, supported by the country’s abundant gas supply—particularly, in the case of NextDecade, access to cheap and abundant associated gas from the Permian Basin and Eagle Ford Shale—existing pipeline infrastructure, geopolitical trade considerations, and a competitive project execution environment.
Q: Why was the merger of NextDecade and Harmony important to the company’s objectives in the LNG market?
We believe that the merger creates value for all NEXT stakeholders. A public listing not only helps to enhance the company’s global profile among prospective customers, financing parties and strategic partners, but also, we believe, augments its ability to provide solutions to customers and producers, affording the company access to public markets and bolstering its cash position prior to making a Final Investment Decision. NextDecade also anticipates further de-risking of its projects via access to capital markets, enhancing the ability to attract additional world-class customers and partners with binding commercial offtake and gas supply.
Q: How do you envisage the natural gas market developing in the US over the next 5-10 years?
We believe natural gas, and specifically LNG, demand will continue to rise over the coming decade driven by widespread interest in cleaner-burning, higher-yielding fuels, as well as increased coal plant retirements, geopolitical considerations, and burgeoning demand from new buyers. At the same time, US production appears unlikely to slow as exports grow and enhanced efficiencies in production allow for sustainable low-cost supply.
While currently oversupplied, the LNG market is expected to enter a prolonged period of shortage in the early part of next decade due to this increase in demand and certain supply challenges, necessitating new US LNG investments be made in the near term.
In 2015, the global LNG trade topped 244 million tons and, according to Wood Mackenzie, is poised to grow at a 5.5-7.5% CAGR through 2024. In addition, through 2023, 80 mtpa (and 190 mtpa through 2030) of demand is expected to free up as legacy contracts expire and customers look to switch to more competitive U.S. LNG providers. Diminishing resources in historically abundant LNG markets further increases the desire among these LNG buyers and importers to diversify their supply with reliable and cost-effective solutions.
Finally, global environmental considerations in addition to burgeoning technologies and market applications are further anticipated to increase LNG demand. Many countries have implemented clean energy policies, aimed at lowering the level of greenhouse gas (GHG) emissions. LNG, with its higher energy yield and lower greenhouse gas emissions, is therefore a likely beneficiary of these policies.
Q: What are you looking forward to at the NAGF and where do you see the greatest value in being part of this key industry dialogue?
While I greatly enjoy attending the numerous presentations and speeches from our peers, I think the most exciting part for me personally is having the opportunity to network with so many of our industry colleagues, partners and potential suppliers and customers. NAGF provides a unique opportunity for key natural gas and LNG participants from every corner of the globe to come together, share, connect and build business relationships. In such a global industry, it can be challenging to meet face-to-face, which I believe is crucial in building relationships and, ultimately, doing business. NextDecade is proud to be a sponsor of the North American Gas Forum, and what better place to host it, than the capital city of the country poised to transform this burgeoning global industry!