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Leslie Chats with Tarek Souki on US LNG Financing , Global Trade and Family Business Dynamics
65 Plays8 days ago
In this Energy Vista episode, Leslie Palti-Guzman sits down with Tarek Souki, an energy executive with deep experience in the U.S. LNG industry through his roles at Cheniere Energy and Tellurian. Together, they unpack the challenges of financing LNG projects, and whether America can maintain its competitive edge in the global LNG race.
How do financing hurdles, long-term contracts, and regulatory uncertainty shape the future of US LNG? What role do geopolitics and trade tensions play in securing buyers? And is Venture Global a true market disruptor or a company testing the limits of the system?
Tarek also reflects on his career path, from investment banking to working alongside his father, LNG pioneer Charif Souki, and shares insights on navigating family business dynamics.
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Transcript
00:00:06
lpaltiguzman
Welcome to Energy Vista, a podcast on energy issues, personal and professional trajectories. I'm your host, Leslie Palti-Guzman. It's March 13, 2025, and time for a new Energy Vista episode.
00:00:20
lpaltiguzman
Today, I'm exchanging with Tarek Souki, an energy and professional executive entrepreneur who was involved over the past 15 years with two well-known energy export companies, Chenier Energy and Tellurian.
00:00:37
lpaltiguzman
Hi Tarek, I'm so happy honored that you can join the Energy Vista podcast.
00:00:42
Tarek Souki
Hi, Leslie. Thank you for having me. It's it's great to be here.
00:00:46
lpaltiguzman
Good, so let's delve right into the topic of the day, which is US LNG. And I'm very curious about the financing of this project. Because with the Trump administration coming back to office and with the ambition of and unleashing American liquid gold,
00:01:06
lpaltiguzman
We know that it's not that easy, even if the permitting is um now not an issue, not a challenge anymore. There are still some ah pending challenges, obstacles for US energy. One of them is financing.
00:01:24
lpaltiguzman
And you've been dealing with two big projects in the past. Tell us a little bit, like from your perspective, what's the most complicated for independent energy companies when they Want to develop an energy project to export energy to the rest of the world.
00:01:41
Tarek Souki
I think there's a lot to unpack there. Right. And I think this is very timely given that or this week is Sarah week. And if you look at any of the media and all of the things that are you know going on, your LinkedIn, whatever else, in terms of what people are saying, it's all talking about, you know,
00:01:57
lpaltiguzman
right.
00:02:03
Tarek Souki
ah Exactly what you just mentioned about the Trump administration and how permitting is supposed to be easier and how we're ready to go. um i mean, everything is abuzz with that.
00:02:13
Tarek Souki
And as usual, as you would expect around a big energy conference, everybody is being very positive and and very ah bullish on what it is they're going to be able to accomplish in the current environment.
00:02:25
lpaltiguzman
for all us in the collision.
00:02:27
Tarek Souki
Having said that and having been through, as you said, two projects or two companies and and three projects, really, um it's amazing how many people think you just show up and build one of these things, right?
00:02:38
Tarek Souki
and And while the permitting process itself has become more, ah has become, will say, more open, um you know, a FERC permit is still a massive undertaking that costs 60 $100 million, dollars ah requires thousands and thousands of pages, ah all kinds of modeling, and all kinds of safety checks, engineering.
00:03:05
lpaltiguzman
and And navigating the change in in procedures. And we know that depending on the administration, we've seen ah many changes with the permitting process also between FERC, DOE, and the timing.
00:03:18
Tarek Souki
what Certainly with DOE, FERC a little bit less because you nominate the commissioners and then you get assigned a caseworker.
00:03:20
lpaltiguzman
Yeah. yeah
00:03:25
Tarek Souki
And that person is not not a commissioner. They're they're and a government employee. They don't really have any political affiliation, really. I mean, nothing public.
00:03:35
Tarek Souki
Their job is really to look at your application, your filing, and proceed. Now, the administration...
00:03:41
lpaltiguzman
I mean, the main change for FERC has been to consider or not the full cycle of CO2 emissions for an LNG project, which in the latest ah permits, you know, that has dragged some of those ah green lights.
00:03:55
Tarek Souki
in Oh, for sure. And and actually, i mean, there in, you know, when this all started sort of in 2008, when people were 2009, when people were looking at doing liquefaction for the first time, you were kind of inventing it as you were going along and now you've got an established precedent.
00:04:14
Tarek Souki
um And we've we've seen as a few people who've made mistakes on their on their permitting, who haven't filed for enough footprint, who you know who went for under nameplate instead of full nameplate and then realized not only can I produce nameplate, but I can produce above nameplate.
00:04:29
Tarek Souki
And then that causes pertinio some violations potentially
00:04:35
lpaltiguzman
which is not familiar with this jargon, it's whether you produce a certain volume of LNG, g which goes beyond your technical capacity of the project.
00:04:45
Tarek Souki
Right. what Whatever your engineering company says, you know this is how much you you can produce.
00:04:51
lpaltiguzman
Right.
00:04:51
Tarek Souki
That's your nameplate capacity. Oftentimes, many of those projects can produce above nameplate, particularly and in cooler months. um you know Sort of like anywhere from November to to March, they can produce well above nameplate.
00:05:06
lpaltiguzman
Yeah. and So in terms of cost, you were mentioning like the the whole permitting process in itself, where you need the lawyers and you need the paperwork and all this.
00:05:17
lpaltiguzman
um But so the latest ah US LNG projects that took final investment decision, the amount was about like between 10 to $20 billion, dollars right?
00:05:20
Tarek Souki
Thank you.
00:05:30
Tarek Souki
Yeah, so I would say today, i mean it's it's great. Venture Global went public and has put this out in front of everybody. They're saying Plaquemines is going to cost them about $1,200 per ton. million ton facility.
00:05:45
Tarek Souki
so that puts the price tag for their twenty million tons at about twenty four billion dollars ah Yeah, we can sort of lift the hood, lift the cover off of that and see what's in there. How much of that is construction costs?
00:06:00
Tarek Souki
How much of it is the upfront costs? How much of it is owner's costs that will come in at different points? And then how much of it is financing costs? um and And then that's another thing. So you talked about wanting to get into the financing bits of it, which which we can do.
00:06:14
Tarek Souki
But, you know, this is also in an environment where um money has become much more expensive these days, right?
00:06:20
lpaltiguzman
That was.
00:06:20
Tarek Souki
And so the capital markets have changed. And then beyond that, the business model also has not kept pace with the changes in the market. So there are a lot of things at play here that that actually, I think if I learned anything over the last 15 years is there are so many factors at play all the time that you have to be on top of, you have to be ready to change with that. you know it's it's ah It's a huge undertaking to build one of these projects.
00:06:47
lpaltiguzman
Right. So staying a little bit more in detail about the financing, how many banks, like for example, like ah a typical LNG project that is not ah bankrolled by a deep pocket company, an IOC, or that is not and and led by a sovereign fund from and national governments.
00:07:10
lpaltiguzman
What's tell us a little bit the different steps, like what do you need to gather?
00:07:13
Tarek Souki
So you have to have both your equity and your debt identified. And it depends on how you raise it.
00:07:18
lpaltiguzman
All right.
00:07:19
Tarek Souki
If you're a public company, if you go to private equity, um the the the debt process is a little bit more straightforward. If you're going to do it as a project development, it's going to be in the form of secured debt at a project level.
00:07:33
Tarek Souki
um Basically, if anything goes wrong with your projects, the banks will own it. But you have to understand that you will have to get a credit rating ah to do that. and And in order to get a credit rating, um you you go to your rating agencies, Moody's, S&P, Fitch, they evaluate your contract structure, they evaluate your parent company, and if there are any other encumbrances, they evaluate the
00:07:54
lpaltiguzman
Mm-hmm.
00:08:01
Tarek Souki
they evaluate the amount of equity versus the amount of debt that you're trying to get and what your coverage ratios are going to be. And then they assign you a rating. Most typically you will be in a double B ah sort of area, maybe up, maybe triple B, but very rarely in the development stage will you be triple B. You'll probably be double B. And you have to understand what the depth of capital markets is right there. So if to get double B rating, you know, you probably have about 10%,
00:08:31
Tarek Souki
you know somewhere between $8 to $10 billion dollars of debt available to you in the BBB market at any given time if your project you know looks attractive. um So, yeah
00:08:42
lpaltiguzman
And the banks, one of the criteria that the banks are looking for is enough long-term contracts for the projects, right?
00:08:48
Tarek Souki
yes, that is a big factor in all of this.
00:08:51
lpaltiguzman
and And historically, they were looking at at least the commitment of 80% of the project under long-term contract for LNG project.
00:09:00
Tarek Souki
I think given a set of pricing, that's correct. right and um Now, if you had really good pricing on your contract, then you could probably have less of your project committed.
00:09:03
lpaltiguzman
Right.
00:09:11
Tarek Souki
Because really what they do is they look at all your revenue minus all your costs and whatever's left over for debt service afterwards. you know If the ratio is high enough, then you you if you have 50% contracted, that would be fine.
00:09:25
Tarek Souki
But you have to have a high enough ratio.
00:09:27
lpaltiguzman
Right.
00:09:27
Tarek Souki
So it all boils down to that.
00:09:28
lpaltiguzman
So
00:09:30
Tarek Souki
But yes, for us, it when we were at Chenier, we were 80% contracted on the first on the first project.
00:09:36
lpaltiguzman
it seems that some projects elsewhere, like if we take the example of the expansion of Qatar, they don't seem to be at all fully contracted yet. And still they go ahead with construction, right?
00:09:49
lpaltiguzman
um
00:09:50
Tarek Souki
i
00:09:50
lpaltiguzman
It's a different business model. Would you say that the US is at a disadvantage when it comes to um financing these projects? And do you think there is a role here for the US government, especially under the Trump administration, which is much more supportive and want the US in this role of a larger exporter and unleashing all this bonanza?
00:10:17
Tarek Souki
So I think had answer that in two pieces. So certainly Qatar has an advantage over a unrated development company in the United States in terms of wanting to build their project.
00:10:31
Tarek Souki
Qatar... You know, will has a sovereign risk associated with it. They're per capita, one of the, if not the richest ah countries in the world. um And now they have 20 years of LNG experience behind them. So they they know how to build all of this stuff.
00:10:48
Tarek Souki
ah For them to raise capital, it's it's very easy. There are many institutions that are more than willing to give them the money to build all this. And plus they have cash flow from their existing operations. They can do a lot of this themselves.
00:10:59
lpaltiguzman
What?
00:11:01
Tarek Souki
The United States, I will say, has one of the most robust, has the most robust capital market system in the world, right? So ah they have a huge advantage from that perspective. You have, you know,
00:11:13
Tarek Souki
billions and billions of dollars available in the United States to build all kinds of things. um Your problem is in the US, you have a business model that you have to adopt in order to make your financial institutions comfortable.
00:11:26
Tarek Souki
You know Qatar had to do some bit of that when they did the early Russell Fund, right? I mean, They had basically, it's funny to think about it, but some of the business model for Ross LaFond was selling LNG to the United States when Henry Hubb was, you know, at $5.
00:11:44
lpaltiguzman
yep
00:11:45
Tarek Souki
If we can imagine that all of like the first Ross LaFond was built on the premise that your downside case was you're going to ship all your cargoes to America and get $5.
00:11:54
lpaltiguzman
And actually, they they were supposed to come to the first Chenier facility, which was at the time, but ah as a regazification terminal.
00:12:01
Tarek Souki
Exactly. And that was all. And, you know, and we had a we ah we ah discussed a contract with guitar that we actually passed on at the time at something like 98 percent henry hubb That was like, that was our purchase price that we had been discussing.
00:12:15
lpaltiguzman
Yeah.
00:12:18
Tarek Souki
And then the market turned before we ever executed. But I mean, when you go back in history, you kind of roll your eyes at the at the kind of deals that today, oh my God, you'd kill yourself for something like that. And back then an entire project was, you know, built on the premise that you could achieve that.
00:12:33
lpaltiguzman
yeah
00:12:33
Tarek Souki
Today, if you're not at Henry Hub Plus, I mean, everybody tells you $250 will pass, and but that's that's wishful thinking. I'm watching all of this. Anybody who's not north of $3 on their Henry Hub contract, is they're not going to make any money in and this game.
00:12:50
Tarek Souki
Costs are way too high these days.
00:12:53
lpaltiguzman
Yeah. So I was asking because some countries have export, like they have ah an infrastructure fund, right, to support their companies.
00:13:04
lpaltiguzman
So the company the government is not directly investing in these projects, but they are supporting the companies to invest in these projects, right? Like in Japan, for example, you have different um infrastructure funds. Do you think there is ah place in the US for those kinds of organizations?
00:13:18
Tarek Souki
I mean, look, we have all the all the private equity and infrastructure funds you could possibly want in the United States. But again, are
00:13:25
lpaltiguzman
Yeah, but but do you think these funds have a geopolitical agenda? Meaning, do you think they would they would support US energy projects based also on the benefits that they see for the US to export to the rest of the world?
00:13:32
Tarek Souki
you...
00:13:42
Tarek Souki
No, yeah no.
00:13:42
lpaltiguzman
Or no?
00:13:44
Tarek Souki
And, and at the end of the day, even the, the global infrastructure funds, they and they need to make a return on their capital, right? They're not just giving away the money for nothing and there'll be some serious conditions on what that money is and how you're going to pay it back.
00:13:58
Tarek Souki
mean, at the end of the day, you might have a bit more latitude if you're a sovereign, you know, if the government of, I don't know, um, yeah Japan wants something to happen and they're willing to backstop it. Sure, then you have the faith and credit of of the Japanese government.
00:14:15
Tarek Souki
But that's your counterparty, right? i mean, even the Japanese government with an a AAA rating isn't going to go sanction something where they can't make a return for it.
00:14:25
lpaltiguzman
Mm-hmm.
00:14:26
Tarek Souki
I don't see why they would do that. But in the US, that's all you're going to do, right? You have to look at, does the project make money? So all you can do is try to is all the US government can do is try to make available the cheapest amount of money possible for projects to be able to thrive.
00:14:47
Tarek Souki
In a normal administration, I would say you can't even ah you can't even favor one project over another. Technically, you're not supposed to in the United States. You're supposed to basically facilitate conversations with all projects equally.
00:15:00
lpaltiguzman
Right.
00:15:01
Tarek Souki
And then maybe you give a wink and a nod and say, but if you really want something, that's the one that you wanna deal with or that one. Under this administration, given that I just watched Donald Trump market a bunch of Teslas on the White House lawn yesterday,
00:15:15
Tarek Souki
um you know, the the those old rules can kind of go out the window sometimes, right? I mean, if I were like Ford or GM or any of these other car companies, I would be like, what about us?
00:15:28
Tarek Souki
You know, why aren't you marketing our cars on the White House lawn if you're gonna market, you know, Teslas?
00:15:33
lpaltiguzman
Right. Yeah. And yeah, and we saw Chris, right. Also, I think at the one of the announcements from venture global recently. um i mean, that's not new, right? There has been always always like, ah even, ah I guess, at the startup of seven passes, a liquefaction plant, you know, some members of the US government, whether um federal local governments, I mean, there has always been some, so some kind of support, right?
00:16:03
Tarek Souki
Yeah, sure. So i make the distinction between the two, right? So when we opened Sabine Pass Regas, we had the then senator from the junior senator from Louisiana, David Vitter was there, the secretary of energy was there.
00:16:11
lpaltiguzman
Right.
00:16:21
Tarek Souki
um We had, you know, then we had everybody in rank and file from you know the, the, the secretary being the senior ranking person to the head of the pilot, the Louisiana pilots being, you know, sort of the more junior, they all spoke, but that was there more to open the ceremony, celebrate the the fact that, you know, $2 billion dollars had gone into Louisiana to build a project that, you know, you're going to employ one hundred, 150 people on a long-term basis, that there's a multiplier effect.
00:16:52
Tarek Souki
And I'm sure, i mean, when Sabine Pass opened up for liquefaction, it was, know, it was even bigger because it was $12 billion dollars that had gotten spent and the multiplier effect was huge.
00:17:03
Tarek Souki
And entire communities benefited in ways they'd never benefited before down in the region for for it. So they come out in support of that because it's job creations. But my point on the government is it's it's not going to say, oh look, there are these four projects. You guys should talk to this project.
00:17:21
lpaltiguzman
Yeah, the Pico Wiener, right.
00:17:23
Tarek Souki
Yeah, they don't pick winners.
00:17:24
lpaltiguzman
Yeah.
00:17:25
Tarek Souki
yeah Well, they're not supposed to pick winners. Let's say that.
00:17:27
lpaltiguzman
yeah So without picking on one specific project, we know that there is a lot of rumors and chatter around venture global right now.
00:17:36
Tarek Souki
Yeah.
00:17:36
lpaltiguzman
They recently went on started an IPO. The share dropped significantly, I think more than minus 60% since the opening, since going public.
00:17:48
lpaltiguzman
There has been in the past some litigations, arbitrations still ongoing. Is venture global a disruptor because they found a new business model that nobody else advanced before, which is a modular construction and cutting costs heavily, or are they a cheater?
00:18:08
lpaltiguzman
Like how how should should we think about them? you know Without going too much into ah the negativity here, but I think European customers right have questions.
00:18:20
lpaltiguzman
ah Can they still trust the US and US companies? and we've We've seen all those debates going on since the the project started. Kalkasupas and now Hlakemin LNG.
00:18:32
Tarek Souki
So I think they are a disruptor, but not for the reasons you mentioned. um Because if you look at the modular technology, first of all, that's Baker Hughes that put out the modular technology.
00:18:48
Tarek Souki
Elba Island was the first one to do that. And it wasn't huge enough.
00:18:53
lpaltiguzman
which is a project now that where Shell is behind the project. Mm-hmm.
00:18:56
Tarek Souki
That's right. But they that they use you know modular small trains. And I think the execution on that, I don't think it makes much of a difference, right? I mean, if if they've just come out and said that Plaquemines is going to cost them $1,200 a ton, I bet if you ask Woodside what Louisiana LNG is going to cost them, they're going to tell you it's going to be something similar.
00:19:18
Tarek Souki
um But, you know Woodside has actually a cost of capital advantage because they have a better credit rating for themselves. that's how That's how Sempra, for instance, has been able to do their projects um you know at all is because their cost of equity capital is very low compared to a development company.
00:19:37
Tarek Souki
that has equity capital, you know, cost of 20% or more. No, I think, I think they've disrupted the market in the way, in in a way that they drove prices way, way, way down.
00:19:49
Tarek Souki
Right. So when Chenier, when Chenier offered its first contract to BG group, it was at 115% Henry hub plus two 25.
00:19:56
lpaltiguzman
Yeah.
00:19:59
Tarek Souki
That was the sweetheart deal that they got. Then gas Nat was two 49. Then, then
00:20:04
lpaltiguzman
guess that's from Spain. Yeah.
00:20:06
Tarek Souki
Yeah, GasNet from Spain that's now Nattergy. And then Gale and CoGas were both at $3. This was all public information, so it was all in the public domain. And then when we did Corpus Christi, because it was a completely greenfield...
00:20:18
lpaltiguzman
So just to explain a little appendix. So it's the cost of Henry Hub price, the which is the price of natural gas, plus the cost of liquefaction.
00:20:28
lpaltiguzman
And that puts together is the cost of USLNG.
00:20:29
Tarek Souki
That's...
00:20:32
Tarek Souki
Yeah, 115% Henry Hub plus your adder of, you know, for Cheniere, it was between $225 and $350 between its two projects, right?
00:20:43
Tarek Souki
That that was the cost of liquefaction.
00:20:43
lpaltiguzman
Yeah. And Venture Global, but what did they offer for their first clients?
00:20:48
Tarek Souki
so from what i've heard because of their information was not public and they've never published it um was 175 for their so their sweetheart deal so the liquefaction fee of 175 and uh i don't think ever much above 210 220 on plaquemans or any of their other projects and it forced every other project that was trying to compete so
00:21:10
lpaltiguzman
Mm-hmm.
00:21:14
Tarek Souki
You know us when we were at Tellurian, you know, Port, you know, Sempra at Port Arthur. um and And then, you know, the next decade with Rio Grande, all of them had to kind of offer the same thing.
00:21:27
Tarek Souki
All right. yeah Energy transfer with Lake Charles, which. That project's been around forever, and they haven't been able to come off the ground. Because at the end of the day, you need to have enough revenue to be able to pay all your expenses, and then you have to be able to pay your debt service, and then you have to have a return to shareholders.
00:21:27
lpaltiguzman
um
00:21:45
Tarek Souki
And if it's not your own equity, then you also need to have a return to your private equity.
00:21:50
lpaltiguzman
So we know that in order to get a return, what's now acknowledged is that Venture Global got very lucky because the Ukraine invasion happened by Russia and the prices of natural gas hijacked, and I mean, skyrocketed, especially in Europe.
00:22:06
lpaltiguzman
And as a result, they were able to sell spot cargoes at a very high price, delaying the commercial startup of their long-term contracts. So they recovered a lot of from their investments um thanks to the high prices of the spot LNG cargoes.
00:22:22
Tarek Souki
they They did. And so from what I can tell from what their public violence filings say they've plowed most of that back into their projects um and it's yeah and haven't really reduced the debt burden that they have. So The upshot of that is for a time it was legit that they did that, right? The contract would have said you can commission for this long. There's a narrowing window process in every LNG contract that says, you know, if it takes us this long to build, we have to give you notice at this point to say it's gonna be between, know, this 180-day period, then it's 90 days, then it's 30 days and you narrow and you narrow until you target the first week of delivery.
00:23:09
lpaltiguzman
Mm-hmm.
00:23:09
Tarek Souki
Up until the windowing mechanism, yeah once you pass that, then then then it got into foul territory. And that's where the arbitration started. This is where their customers decided to sue them to say, after the net after the windowing mechanism, you declared force majeure on on the project and don't and refuse to start our contracts.
00:23:31
Tarek Souki
When yeah I'm saying, um how can you declare force majeure when you're actually selling you know a commercial amount of project or cargos. It's beyond my knowledge base to tell you who's right and who's wrong. The American and European court systems are going to determine that.
00:23:51
Tarek Souki
And we hopefully we get that result this year. It'll be very interesting. And that will have impacts on how they start up their second project.
00:24:01
lpaltiguzman
Yeah. Do you think the US government can get involved because it's you know the reputation of US companies on the line and US energy exports or not really?
00:24:11
Tarek Souki
I think the courts will get involved. I don't see why the administration would get involved at all. but it's It doesn't really concern them. It's not really what the U.S. government will do, right?
00:24:23
lpaltiguzman
Because I think in the past, some European companies have tried to pressure at the time the Biden administration to do something. um But that's just a thought.
00:24:34
Tarek Souki
Yeah, look, I mean... ferc's' FERC's role is really to look at the project and determine whether it's operating and it's operating safely. And so if somebody declares force majeure on the construction or says that the plant itself is not ready for commercial operations, the FERC will look at it and say, if you if you say it for these reasons, then fine, we're not going to be the arbiters of whether it is or whether it isn't, right?
00:24:43
lpaltiguzman
Yeah.
00:24:58
Tarek Souki
So we received your notice.
00:24:59
lpaltiguzman
yeah
00:25:00
Tarek Souki
Thank you very much. Do what you need to do to fix what you've got.
00:25:04
lpaltiguzman
Yeah. Mm-hmm.
00:25:04
Tarek Souki
Um, and you know, yeah, they have to file reports every month about how many cargos they produced, how much gas they took in and a whole series of other things. And then they're publicly available. Um, but you know they have produced 300 cargos. They, they, they produced somewhere between nine and a half and 10 million tons of LNG last year, which I don't know under what term of force majeure that qualifies. I've never seen a force majeure that has people producing and doesn't make good on their contracts.
00:25:37
lpaltiguzman
Yeah.
00:25:37
Tarek Souki
But again, the courts will determine you know who's who who owes what at the end of all of this.
00:25:42
lpaltiguzman
Yeah. So I'll need to hear the version of Venture Global and their perspective. as a and would mention just that since you were ah former competitor,
00:25:54
lpaltiguzman
i you know there is no dialogue here or debate. So i'm I'm not the one we can say yes or no how wrong they were.
00:26:01
Tarek Souki
No, and I doubt anybody at Venture Global or Shell or BP can talk to you about any of it until the case is resolved.
00:26:06
lpaltiguzman
thought. Right.
00:26:09
Tarek Souki
Right.
00:26:09
Tarek Souki
So and and look, I say this with my limited knowledge of the actual proceedings and only on the basis of, you know, my own assessments.
00:26:09
lpaltiguzman
Yeah.
00:26:10
lpaltiguzman
Yeah. Correct. Yeah.
00:26:20
Tarek Souki
But what I can tell you is and I've said this recently. any number of times over the last five to seven years, and anybody who heard me say it seven years ago is probably tired of hearing me say it, a project costs what it costs to build.
00:26:36
Tarek Souki
And the financing cost is the same for all of us. Like we don't get, know, we don't get good, good friend discounts from banks, right?
00:26:45
lpaltiguzman
Yeah.
00:26:45
Tarek Souki
If you get a double B credit rating, you know what you're paying for that. If you get a triple B credit rating, you know what you pay for that.
00:26:49
lpaltiguzman
yeah
00:26:52
Tarek Souki
Um, If you have a better cost to capital, it's because you're a financially healthier company. Now for your construction costs, you definitely don't get the, you know, the good friend discount. You know, Bechtel is going to charge you what it charges you. And I know that, you know, some some people that haven't used Bechtel in the past have said, oh but Bechtel is expensive and they're going to, you know, put contingencies on contingencies. and and But you know what? They do it right.
00:27:18
Tarek Souki
They build it right.
00:27:19
lpaltiguzman
Yeah.
00:27:19
Tarek Souki
They build it correctly. And any of the projects that have been on time on budget for the most part have come from from Bechtel.
00:27:26
lpaltiguzman
Yeah.
00:27:27
Tarek Souki
um And so you end up paying for it another way. And at the end of the day, the the the cost differential is going to be somewhere between 5% and 15%.
00:27:31
lpaltiguzman
no
00:27:37
Tarek Souki
And actually the killer is time. So the longer it takes you to do it, um the the more your cost overruns will be.
00:27:44
lpaltiguzman
yeah
00:27:44
Tarek Souki
um So that's it. So like I could tell you what it costs to build a project, what all those units cost.
00:27:53
lpaltiguzman
Yeah.
00:27:53
Tarek Souki
and And I couldn't figure out how you make a return based on the contract structures that the market was proposing at the time, um you know, and still and still make it worthwhile to do your business.
00:28:02
lpaltiguzman
yeah
00:28:07
lpaltiguzman
So let's move to tariffs. We're back into ah kind of trade wars, tariffs mood. And back at Tellurian, I remember vividly when Prime Minister Modi visited Houston, Texas.
00:28:23
lpaltiguzman
It was September 2019. And at the time, ah it was just after a big wave of tension between the US India. So it was already, it it was under the first Trump administration.
00:28:38
lpaltiguzman
And as a way to kind of mend the relationship, Modi, US visit, ah one of the big hits was his visit visit to Houston and signing an agreement, a deal with Tellurian at the time, drift food LNG a contract, ah which I think the value was about 2.5 billion. And it was like 5 million tons of LNG, which is a big contract.
00:29:05
lpaltiguzman
And eventually the contract got canceled. or never got finalized. Can you tell us a little bit, how do you think the politicization of USLNG played there? And was it at the end detrimental and to the project?
00:29:20
Tarek Souki
um Yeah, it was. it was i think ultimately it ended up being detrimental to the project. um We signed a memorandum of understanding with ah with Petronet specifically. um And Prime Minister Modi was there to witness the signing of the of the memorandum of understanding. And then we worked really hard over the next six months with Petronet to try to formalize the agreement.
00:29:47
Tarek Souki
We'd also signed an agreement with Total three months earlier or four months earlier. um and we're good trying to get you know the next customers in for months. you know for the for the project. And it was an equity-based project.
00:30:01
Tarek Souki
But if you remember, as we were working through that we were that, this is sort of after that September, we get to January and we exited January at $4 in MMBTU with ah yeah for for global gas prices with China going on lockdown for COVID.
00:30:24
lpaltiguzman
So yeah. Yeah.
00:30:25
Tarek Souki
discussions about whether the rest of the world was going to follow suit.
00:30:27
lpaltiguzman
right
00:30:28
Tarek Souki
If, if, you know, cases of COVID were going to start appearing in different places. And by, you know, by February, it was clear it was appearing in Europe. And then by March,
00:30:42
Tarek Souki
Europeans were locking down, Americans were locking down, and prices had gone from $8, $9 in MMBTU sort of the previous summer down $4 by the end of January, which in winter is you know super low.
00:30:45
lpaltiguzman
yeah
00:30:56
Tarek Souki
And so what we were proposing to the Indians was buy 5 million tons for us, and your price your delivered price to India was going to be around $6. And so they're looking at the current market price of four and going, why are we going to pay six when we can pay four?
00:31:13
Tarek Souki
And that more than anything is what killed that deal.
00:31:13
lpaltiguzman
Yeah.
00:31:17
lpaltiguzman
So price competitiveness. But also, do you think that Modi had in mind, OK, we're going to carry some favor with the Trump administration. He's going to leave us alone for a little while and maybe we'll finalize the deal or maybe we will never finalize it, but we would have gained some time.
00:31:38
Tarek Souki
I think it was that plus any number of other things. Because remember, Trump also went to India in sort of February or March. and And then there was also that big, um what was it?
00:31:49
Tarek Souki
like It was in Houston where they had that big, they hired out the stadium and it was a big like India rally with Modi.
00:31:56
Tarek Souki
And then Trump and and Modi were walking around.
00:31:56
lpaltiguzman
Yeah.
00:31:56
lpaltiguzman
um remember
00:31:58
Tarek Souki
and Modi played it really well, right? I mean, he basically said, You know, look, Trump and I are solid. You know, they, I mean, he held his hand and they walked around holding hands for a while.
00:32:10
Tarek Souki
Right.
00:32:10
lpaltiguzman
yeah
00:32:11
Tarek Souki
And then Trump went to India in, in, I think it was, it was March, um, because we were hoping we were going to sign a deal on the back, you know, finalized deal with, with Petronet on the back of that visit.
00:32:23
Tarek Souki
And that visit was just a big, nothing, right. It was more sort of sha handshaking and, you know, seeing industry, but not actually doing any deals.
00:32:32
Tarek Souki
Um,
00:32:32
lpaltiguzman
yeah i hope I hope the people from the second administration go back to what happened at the first administration and realize that not everything has worked out in terms of those trade LNG deals that were supposedly big back then.
00:32:50
lpaltiguzman
And you know a few years later, if you look, whether it's China, whether it's India, in terms of tangible results, right? it's It's not clear that they have all pan out what was expected.
00:33:03
Tarek Souki
Yeah, but look, I mean, even the Biden administration said they were going to send, you know, they're going to send all this LNG from the US to Europe, right? And did any, did any deals get done because the Biden administration said we're sending, you know, we're going to send LNG to Europe? No.
00:33:19
Tarek Souki
um But all of a sudden the price dynamics changed and a bunch of cargoes that were ending up, that were supposed to end up in Asia ended up getting priced out of Asia and ended up in Europe. And he's like, look,
00:33:30
Tarek Souki
Look, but Biden's like, look, we've sent 15 million tons of additional LNG to Europe this year.
00:33:31
lpaltiguzman
right.
00:33:35
Tarek Souki
Look at us. Like we we did what we said we were going to do. The thing the thing I've noticed in this industry more than anything else is everywhere else in the world, there's a very strong link between the government and its and energy industry.
00:33:49
Tarek Souki
um And some government and industry in general, right? They're like, oh, go meet the people in the government. we'll They'll help broker a deal with our companies. Oftentimes there's a state-owned or quasi-state-owned company in which you know you're going to do your deal.
00:34:07
Tarek Souki
um In the United States, it doesn't work that way, right? The United States goes and talks to ah Saudi Arabia, for instance, and says, okay, we've got $100 billion dollars that we're going to work together on.
00:34:15
lpaltiguzman
yeah
00:34:19
Tarek Souki
um It's going to encompass weapons. It's going to encompass aircraft. It's going to have infrastructure, construction, energy. And you know they they count off all these things and they're like, okay, now go make the deals.
00:34:34
Tarek Souki
and then And then it's up to,
00:34:34
lpaltiguzman
Yeah.
00:34:35
lpaltiguzman
So they are sent to each individual private companies in the US.
00:34:40
Tarek Souki
That's right. That's right. And so and then all the US private companies sit there and apply to you know, the Saudis after that and say, hey, you know, you you just signed this deal with with the US government.
00:34:52
Tarek Souki
um Can, you know, 5 billion of it be with our company and they'll have a beauty contest for which company in the US is better looking for a $5 billion dollars deal? I mean, that's that's kind of how it works.
00:35:08
lpaltiguzman
Yeah, yeah. No, very interesting. um Good. Let's move to your personal trajectory, Tarek. I think we'll, for on the political side, we'll have to come back in ah at the end of the Trump administration to see what was the success rate.
00:35:24
Tarek Souki
yeah Well, look, ah last, ah before we get to that last thing I'll say on that, you the, the U S is really good at, it sort of grabbing headlines and trying to make deals. I mean, I think if you look at what's going on at the conference this week, that's everybody, you that's, there are a lot of headlines and everybody's using it to get their headlines out.
00:35:40
lpaltiguzman
Yeah.
00:35:42
Tarek Souki
Um, what it will mean, you know, at the end of the day, business is business and you've got to figure out how much things cost and will they make a return? And for us companies, it's actually that simple.
00:35:54
lpaltiguzman
yeah I mean, to my earlier point, US LNG projects are commercially driven. Some projects around the world are politically driven, whether it's Russia or Iran, potentially one day they get to that or whatever, or you know other price fred other places which is um that have a political agenda which is very different from the US. And that's why like my big theory is that we have to invest in the US also because we don't want all the eggs to go into those countries that have political agenda that are are not aligned with our values.
00:36:32
Tarek Souki
Hmm. Hmm.
00:36:32
lpaltiguzman
Because they then it means that that there is a concentration of wealth in these countries and we are not we they didn they they don't you know they can use this wealth to wage war ah militarily or ideologically on our democracies and so on.
00:36:49
lpaltiguzman
So like for me, that's something to keep in mind. That's why I think in the US, if the government can help, maybe not the same way you know with a state-owned company, but other ways, I think it's helpful if um for those kind of projects to get off the ground.
00:37:08
Tarek Souki
If you can find a way to make the government look good, they will help you.
00:37:11
lpaltiguzman
yeah
00:37:11
Tarek Souki
yeah
00:37:13
lpaltiguzman
Good. So let's move to your personal trajectory.
00:37:16
Tarek Souki
Sure.
00:37:25
lpaltiguzman
So Tarek,
00:37:28
lpaltiguzman
you know when i I've known you for for a couple of years and something that strikes that yeah that strikes me is that you've been working with your father. ah For people that have not made the connection, your father is Sharif Suki, who was um one of the pioneers actually in the US LNG industry.
00:37:48
lpaltiguzman
a businessman, renowned businessman, and he actually saw before anybody else the opportunity of switching around from the US as an importer of natural gas to becoming an exporter of natural gas and change around the business model ah first with Sabine Pass, the Sabine Pass LNG project and jumped on the opportunity.
00:38:10
lpaltiguzman
and I think that's pretty much at that time that you joined Chenier Energy.
00:38:17
Tarek Souki
That's correct.
00:38:17
lpaltiguzman
So um tell us a little bit, how is it ah to make the decision to work with a family member? And I'm very familiar with this concept because I've been working with my husband for six years. We we started a company together and my family has also a family business and some of my siblings are working with my father. So I'm actually curious to hear a your why.
00:38:45
Tarek Souki
So The why for me had nothing to do actually with my dad himself at the time. right I was a banker at the time. i was working at Credit Suisse. I was financing resource projects. i did I spent some time in the energy group and on the commodity desk. But even on the commodity desk, I was financing oil and gas projects, mining projects.
00:39:07
Tarek Souki
We would hedge the output of whatever the project was. Um, and Chenier at the time was flagging, right. It had gone from this re gas facility to being, you know, basically being drowned by shale, you know, the shale revolution.
00:39:23
Tarek Souki
And so from 2008, I joined Credit Suisse 2007 to 2012, um,
00:39:25
lpaltiguzman
Thank you.
00:39:30
Tarek Souki
twelve um Chenier was struggling to figure out how they were going to turn this, this useless re gas facility into something else. And I remember my father and I were having dinner one night and he's telling me about liquefaction.
00:39:47
Tarek Souki
And he told me, and I asked him, okay, you regas cost you $2 billion. dollars You guys are on the, you know your market cap is now $150 million. dollars How much is a liquefaction plant going to cost? He said 10 billion.
00:40:02
Tarek Souki
And I remember I took my pen out of my pocket and I started writing on a paper napkin and I started doing like And like $10 billion dollars return on assets. that And I'm like, okay, so if this works, your $150 million dollars market cap company should be worth at some point between $10 and $15 billion dollars just on the market cap.
00:40:23
Tarek Souki
he says, yes. And I looked at him and I said, okay, I want in.
00:40:28
lpaltiguzman
You
00:40:28
Tarek Souki
Yeah. That's it. It was really down to that. And, and, and it was exciting and that what they were doing now, even after that, it took probably 12 months from that, because that was in 2011.
00:40:41
Tarek Souki
And it took me 12 months to finally get approval from their board of directors to let me join the company. um
00:40:47
lpaltiguzman
yeah I think it's very good that you had a prior experience, you know your own expertise before joining, right?
00:40:48
Tarek Souki
But
00:40:54
lpaltiguzman
Because it prevents you know the imposter syndrome in some ways or coming in with your own credibility.
00:41:02
Tarek Souki
It helped a lot. And, and frankly, for the first, you when i was at Chenier, was there for three years before, uh, they, they saw fit to ask us to no longer work there.
00:41:13
Tarek Souki
Um, they, um, I didn't even work directly for him. i worked for Meg Gentle, who was the EVP um of marketing at the time, and then went on to become the the first CEO of Tellurian.
00:41:29
Tarek Souki
and And so it wasn't until I was at Tellurian that I was working pretty much directly with him as an executive on on the executive team at the at the firm.
00:41:40
lpaltiguzman
Yeah. I would say that I found out that on As entrepreneur, it's very common actually to work with family members, whether it's your spouse, your partner, siblings, or best buddies. Why? i mean, for me, it's because you need people that you trust ah around you and also very dedicated, um you know, that are highly committed.
00:42:04
lpaltiguzman
Was it the case for you? Like you felt that, um especially with Tellurian, which was, you know, a closer circle around your father.
00:42:14
Tarek Souki
Yeah, look i mean look, I went through all the banking. I yeah i did my MBA. i went through banking. you know I went through the the hardcore, you know killing kill you sort of banking where you had weeks where 30-day stretches of never leaving the office and things like that.
00:42:23
lpaltiguzman
And then say, but
00:42:32
Tarek Souki
um you know Hard work wasn't ah wasn't an issue. it's And I agree with you. There is a level of trust with your family members. And And I'll use a little humor here.
00:42:44
Tarek Souki
yeah Right now in Hollywood, everybody talks about Nepo babies, right? That's like all, I don't know if you've seen this term, but it's like all this, the children of former stars or or stars or, you know, like, um, uh,
00:42:53
lpaltiguzman
ah yeah
00:43:00
Tarek Souki
Yeah, they're like, my children are now actors and actresses. and And to be honest with you, it makes a lot of sense because it's not just in Hollywood, right? I mean, how many musicians have talented musicians for children?
00:43:12
Tarek Souki
Maybe they're not rock stars like their parents, but but you know they but they grew up learning how to play an instrument and they grew up with music all the time.
00:43:13
lpaltiguzman
Yeah. Right. Yeah.
00:43:18
lpaltiguzman
Oh, totally.
00:43:20
Tarek Souki
If you're an actor...
00:43:20
lpaltiguzman
Well, last night I was watching um the setup come well the stand-up show from Jamie Foxx and he brought in his daughter with a guitar.
00:43:27
Tarek Souki
Yeah.
00:43:29
lpaltiguzman
Right.
00:43:30
Tarek Souki
Right. You know, it's like, and who gets, and why wouldn't you give your kid that kind of an opportunity if you could?
00:43:31
lpaltiguzman
but her Opening her the gate. Yeah. Yeah.
00:43:37
Tarek Souki
I mean, Pink brought her daughter out on stage to sing with her.
00:43:38
lpaltiguzman
yeah
00:43:41
Tarek Souki
um You know, I mean, look, Gwyneth Paltrow is the daughter of an actress in the on her on the mom's side and on her father's side, a producer, right? I mean, it's like they grew up in the industry, but nobody seems to say that when it's an accountant, right?
00:43:50
lpaltiguzman
but
00:43:54
Tarek Souki
I mean, how many accountants, like, I mean, I mean, you're you're French, Leslie, how many pères et fils, you know, like, you know, how many wineries have like father and son and pass things down to generations?
00:44:00
lpaltiguzman
I
00:44:05
lpaltiguzman
i mean, you know, I think historically you were learning the crafts from your father, right? So, you know, you were a sho shoemaker or, you know, from son to father.
00:44:13
Tarek Souki
That's right.
00:44:20
lpaltiguzman
Yeah.
00:44:20
Tarek Souki
Yeah. Yeah. Yeah.
00:44:21
lpaltiguzman
Father to son.
00:44:21
Tarek Souki
So, I mean, so it's, it's natural, right?
00:44:22
lpaltiguzman
Yeah.
00:44:24
Tarek Souki
But look, I have, I have four siblings and I'm the only one who went into the energy business. I'm the oldest of four or five. And I'm the only one who went to the energy business.
00:44:34
Tarek Souki
My two brothers also worked with my dad, work with my dad, but more on the family side than on the energy side.
00:44:41
lpaltiguzman
Yeah.
00:44:41
Tarek Souki
I'm the only one who went into to that door. It took that direction.
00:44:45
lpaltiguzman
i mean I think you know family businesses in itself are um um kind of a jewel for um for the economy because you know it's kind of a different business model.
00:44:45
Tarek Souki
So,
00:44:58
lpaltiguzman
And usually there are surviving generations, some of them, generations after generations, and yeah are you know it's not the same um quick gain or risk you know selling and it's not the same mentality.
00:45:15
Tarek Souki
No, I mean, look at Bechtel, right? Bechtel is one of the biggest construction and engineering firms in the world. And that's a fifth generation company. I mean, Brendan is the fifth Bechtel to take the the helm of that company.
00:45:29
lpaltiguzman
Hmm.
00:45:31
Tarek Souki
Yeah, I mean, it goes way back to his great grandfather.
00:45:31
lpaltiguzman
Very interesting. I didn't know that many generations. Very interesting. Good.
00:45:37
Tarek Souki
Maybe that's the fourth.
00:45:37
lpaltiguzman
Good. Yeah.
00:45:38
Tarek Souki
I have to do my math on that.
00:45:42
lpaltiguzman
Yeah, great. Well, um let's see what the future holds for ah family businesses in the inner energy sector. um And maybe we'll talk again soon in the um on this um this note.
00:45:55
lpaltiguzman
Thank you so much, Tarek. And I'll talk to you soon.
00:45:59
Tarek Souki
Anytime, Leslie. Thank you very much for having me.
00:46:02
lpaltiguzman
Thank you.
00:46:09
lpaltiguzman
This episode was recorded on March 13, 2025. This is Leslie Peltie-Guzman saying good day and good luck.