New Fortress Energy Inc. is new to the LNG-export game, but its billionaire chief has big plans. Within a couple of years, he aims to supply as much as 11 million metric tons of the superchilled fuel annually — the equivalent of almost 16% of total U.S. exports.
For a company that’s mostly a buyer of the fuel, the plan sounds like a pipe dream. Wes Edens, the private equity investor who founded the company, says he will use fast-track permits, recycled jack-up rigs and deep-water drill ships to get there.
His big ambitions speak to how much the global market for the power-plant and heating fuel has exploded on the back of an energy crisis in Europe and the war in Ukraine.
“If you want to make a great fortune, solve a great problem,” Edens, a billionaire co-owner of the Milwaukee Bucks NBA team, said in an interview. “And the problem of energy poverty and the problems of energy insecurity are gigantic.”
The threat of supply disruptions has driven prices for the fuel to record highs, handing a windfall to its suppliers and financially stressing its buyers. It’s also improved the prospects for new LNG export projects that didn’t have the financing to get off the ground.
“Not only is the price likely to stay high, but the duration of the crisis could be materially longer than what people might otherwise expect,” Edens said. “We’ll be providing gas at the most needed time”.
New Fortress owns gas-to-power projects and relies on LNG supplied by others under long-term contracts. In the long term, becoming an exporter could help New Fortress shield its import businesses from surging prices a time when the company eyes opportunities for new power projects in Europe, Brazil and South Africa. That would also allow it to benefit from booming prices in the spot market.
New Fortress has soared almost 87% this year, more than twice the average gain for the companies in the S&P 500 Energy Index, to the highest in a year, with investors rushing to buy LNG stocks after the conflict in Ukraine began.
Last week, the company announced plans to build its first liquefied natural gas production facility off the coast of Louisiana with capacity to produce about 2.8 million metric tons of LNG per year. Edens says that the roughly $1.4 billion project could be completed in less than a year by avoiding much of the complex permitting process that new onshore export terminals are typically faced with. The company has adequate funds and capital to fund it, he said.
Since making the decision to move into LNG production in early 2021, New Fortress has acquired three jack-up rigs and two deep-water drill ships that will be recycled into LNG facilities with the installation of liquefaction equipment that’s been manufactured in Texas. The company has also reached terms for a fourth rig.
Roughly a dozen proposed terminals authorized by U.S. regulators over the past several years haven’t been built because developers are still trying to line up funds. What makes offshore projects easier to advance, according to Edens, is the fact that they can rely on old ships for storage as opposed to building new storage tanks.
“The storage tanks are the challenge,” he said. “They cost a lot of money, a lot of time to permit and they’re environmentally very sensitive.”
U.S. LNG exports are also constrained by limited pipeline capacity.
“Wes Edens is an entrepreneurial leader on a mission,” said Rob Thummel, portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets. “I would expect the New Fortress Energy project to cost more and take longer to build than what is currently estimated but it could be part of the global solution of replacing Russian gas imports into Europe.”
This article was provided by Bloomberg News.
