Glenfarne EVP discusses Biden LNG pause, future opportunities

In July 2024 Oil & Gas Journal editor-in-chief Christopher E. Smith interviewed Adam Prestidge, executive vice-president – head of business affairs for Glenfarne Energy Transition LLC’s LNG unit. The company is developing the 4-million tonne/year (tpy) Texas LNG plant in Brownsville, Tex., and the 8.8-million tpy Magnolia LNG plant in Lake Charles, La.

Before joining Glenfarne, Prestidge was a career attorney, most recently at Sidley Austin LLP where he focused on mergers and acquisitions and corporate transactions in the energy and infrastructure sectors. Smith and Prestidge discussed a variety of topics, ranging from the effects of Pres. Joe Biden’s pause on DOE approvals of LNG exports to non-FTA countries to opportunities across the broader energy markets. The highlights of this talk follow.

OGJ: In January, the Biden administration paused Department of Energy (DOE) approvals of LNG exports to non-free trade agreement (FTA) countries as its review process is revamped. At the start of this month, a judge stayed implementation of the pause. Presumably, the DOE is still revamping its review process. What is the status of DOE permitting for Glanfarne’s projects?

AP: Texas LNG stands out in the LNG market because it is fully approved and equipped with all local, state, and federal permitting requirements, including the DOE non-FTA authorization that is the center of so much attention. We are one of few projects in this position, and our progress towards FID [final investment decision]—being nearly sold out of capacity—is evidence of this. Most recently Texas LNG solidified its two heads of agreement (HOA) with EQT Corp. by executing a definitive 20-year tolling agreement for liquefaction services for 2 million tpy of LNG. The company is actively converting its other HOAs into definitive agreements in prepartion for final investment decision.

Texas LNG will also be among the lowest-emitting liquefaction facilities in the world thanks to its green-by-design capabilities, which includes running on fully electric motors. These factors make the facility attractive to buyers across the globe and to US producers looking to export their gas as LNG.

Glenfarne refiled Magnolia’s non-FTA application late last year, and it is pending DOE action. Magnolia has already been vetted once by DOE and has previously been demonstrated to be in the public interest, so when the pause lifts, we expect that the review should be straightforward. Furthermore, Magnolia LNG is exactly the type of LNG project that DOE says it wants to authorize, because our patented technology generates 30% lower emissions than typical US LNG projects and our site will utilize existing power and utility infrastructure.

OGJ: How does this whole situation impact independent (non-major) LNG operators such as Glenfarne and how do you expect it to play out in the end? My own view is that the pause will be lifted after the election, regardless of who wins. It’s just a matter of whether it takes days or months.

AP: There’s an expectation that the pause will be lifted after the election. If it’s Biden, DOE will not likely make any decisions until after the public comment period on the new analysis is complete, but Biden’s own Secretary of Energy has said that the pause will be over in early 2025. If it’s Trump, we expect that DOE is likely to start making decisions sooner.

However, even as the Administration and industry work through this period, it does not affect Texas LNG because the terminal has all required permits and regulatory approvals. This puts us at a competitive advantage as we discuss commercial export opportunities from Texas LNG and allows us to continue toward FID and construction unhindered by the pause.

The pause has certainly made it more difficult for projects without permits to move forward; that’s obvious. But the long-term trajectory for US LNG remains strong.

OGJ: What do you see as the costs-benefits of modular construction (with multiple complete ‘mini-trains’ shipped to site) vs. building the entire plant on site? What approach is Glenfarne using for its projects and why?

AP: Glenfarne is taking a modular approach with both of our projects. We believe modular construction allows us to have more predictable outcomes as it relates to the fabrication of the trains as well as the labor force, and ultimately, the overall cost of the project. We are confident that the modular approach, coupled with experienced LNG engineering, procurement, construction, fabrication contractors, and the internal team we have assembled will allow us to deliver LNG on time and on budget to our customers.

OGJ: North American natural gas is in increasing demand. To the extent this demand comes from overseas, it’s great for LNG liquefaction development. Recent projections regarding the amount of new power generation needed to meet demand for crypto mining, AI, and electric vehicles, however, portend increased domestic competition for gas produced here. How do you see the US gas market shaping up and how sensitive to gas prices are projects such as Glenfarne’s?

AP: The US LNG market is unique because of its operational reliability, stable pricing, shipping flexibility, and abundant supply of natural gas. There is significant associated natural gas that continues to be flared, which can be used for US LNG projects. The US also has the fourth largest natural gas reserves in the world. The bottom line is that gas prices in the US have been resilient, stable, and consistent, and the macro picture will not change in a meaningful way.

Projects like ours are vital to advancing the global energy transition and are designed and built for the long-term, as they will be needed for decades to be leading US infrastructure and help emerging markets transition from other fossil fuels to natural gas, and eventually renewables. Demand centers for US natural gas might increase, but at the same time, the global need for energy transition has never been more important, and natural gas will play a critical role in that transition for decades. Overall, we are well-positioned to deliver US LNG to a growing customer base around the world.

OGJ: The US is not alone in increasing LNG liquefaction capacity. How do you see the global gas market shaping up and what is Glenfarne’s role within it? What are the biggest potential pitfalls or sources of competition?

AP: LNG is the cornerstone of the global energy transition because it is the best replacement for carbon-intensive fuels, positioned to help meet immediate demand while more renewables come online. The global need is intense, and we expect the global gas market to continue to grow with increased demand in Asia, Europe, and Latin America.

Glenfarne’s business—our institutional commitment—is to provide clean, reliable, affordable energy where it is needed to facilitate the energy transition. We will be there to assist our customers and their governments when they need to power their homes and businesses.  All of this provides US LNG with a significant opportunity to strengthen its position as a global energy leader.

OGJ: What opportunities do you see across the energy and LNG markets more broadly?

AP: LNG markets will continue to grow, and we are seeing that in the discussions with customers globally, especially given our green focus at both Texas LNG and Magnolia LNG. Emissions and environmental sensitivity matter, and projects that focus on realistic ways to lessen their environmental impacts such as electric drives, use of existing infrastructure, and lower emitting LNG liquefaction technologies, will have an advantage. European customers remain engaged for long-term contracts, and we see both Asia and Latin America as growth markets for LNG.

Glenfarne’s EnfraGen business focuses on grid stability and value-added renewables in investment grade countries and high-growth emerging markets in Latin America. We believe high-growth economies, in Latin America and Asia in particular, are rapidly increasing their energy needs, but their grids are often antiquated and struggle to switch from legacy fuels directly to renewable energy. LNG is a key fuel to bridge the gap and provide baseline generation, helping meet demand while maintaining grid stability.

At Glenfarne, we are investing across the energy value chain, having recently acquired hydro, solar, and wind facilities in Panama and Costa Rica and bringing online more than 15 greenfield solar plants in Chile. Our Colombian plants continue to be the backbone of that country’s electric grid, preventing blackouts during the recent El Nino when there was little to no hydro generation there.