How One Restaurateur Transformed America’s Energy Industry

Source: By Jake Bittle, New York Times • Posted: Tuesday, August 16, 2022

Charif Souki’s longshot bet on liquid natural gas, or L.N.G., paid off handsomely — and turned the United States into a leading fossil-fuel exporter.

Charif Souki in London in June.
Sebastian Nevols for The New York Times

If you wanted to tell the story of how the United States became one the world’s largest exporters of fossil fuels, you could start in the Middle Devonian period, around 400 million years ago, when a warm inland sea dense with primitive aquatic organisms covered parts of the northeastern United States and Appalachia; you could explain that as these creatures lived, reproduced and died, their remains settled on the ocean floor and were compressed beneath layers of sedimentary rock, until eventually they transformed into a gas trapped thousands of feet below what is now Pennsylvania.

Or you could start with the murder of Nicole Brown Simpson.

On June 12, 1994, Simpson ate dinner with some family members at an Italian restaurant called Mezzaluna in the Brentwood neighborhood of Los Angeles. Simpson’s mother left her glasses there, so a waiter from the restaurant, Ron Goldman, went to Simpson’s home to return them. Shortly after midnight, Goldman was found dead with Simpsonoutside her condo. In the aftermath of the murders, reporters and photographers descended on Mezzaluna, followed by buses full of gawking tourists. People walked in to pester employees for details about Simpson’s final evening, even asking waiters what she ordered for her last supper (apparently rigatoni). An owner of the restaurant, a Lebanese American entrepreneur named Charif Souki, was disgusted by the media frenzy — “the morbid curiosity, the lack of taste and decency of people, was pretty astonishing,” he would say later. He decided to sell Mezzaluna and went on to try his hand at something new. After some deliberating, he settled on the oil-and-gas industry.

With a mop of unkempt hair and a penchant for elegant double-breasted suits, Souki didn’t look the part of a Houston wildcatter. He also didn’t know anything about drilling for oil or gas. But he did have a thick Rolodex from his posh Beirut upbringing, his days as an investment banker and his tenure as restaurateur to the stars. Why not raise a little money and give it a try? The infrastructure that moved fossil fuels around and converted them into energy was unfathomably complex, but the people in the business did something relatively simple: They borrowed money, dug up fuel and tried to sell it. That didn’t sound so hard to Souki.

At the turn of the century, growth in the American energy sector had leveled off. Major oil producers like Exxon Mobil and Chevron had staked out the Gulf of Mexico for almost all the oil and natural gas it could yield, and there didn’t seem to be an obvious next place to drill, so there wasn’t much new money flowing in. In fact, some experts and commentators were worried that the United States would struggle to find enough oil and gas to meet rising demand. Buying more oil would be easy enough, because millions of barrels of crude moved all around the world every day on tanker ships, but natural gas was different. The United States was already importing around one-fifth of its annual consumption, mostly from Canada, and the pipelines could carry only so much. Unless the United States could find more gas within its own borders, the price of the fuel would skyrocket.

There is another way to move natural gas around, though. If you cool it down to minus 260 degrees Fahrenheit, it transforms into a liquid. This liquefied natural gas — L.N.G. for short — takes up about one six-hundredth of the space that regular gas does, which means you can load it onto tanker ships and send it across the ocean. The United States had never had much need to import liquefied natural gas before, but Souki figured that rising demand would soon justify the costs. He had already built a small energy company called Cheniere, part of an unsuccessful attempt to find new oil and gas in the Gulf of Mexico, and he decided to put his chips on L.N.G. He called friends from his investment-banking days and pitched them on a solution to America’s energy woes: a gas-processing plant that could “regasify” L.N.G. as it arrived from countries like Qatar, then pump it into domestic pipelines. A lot of people thought he was crazy, but eventually he found the money, and it wasn’t long before he identified a site for the $2 billion facility on a swampy section of the Louisiana-Texas border, not far from a fishing community called Sabine Pass.

The only problem was that he was completely wrong. Around 2007, just as his terminal was nearing completion, a group of energy moguls made a series of breakthroughs in a new method for extracting gas from deep layers of landlocked shale. Hydraulic fracturing, or fracking, had the potential to unlock enough gas to satisfy American energy demand for generations and turn the nation into the world’s largest producer of oil and gas. It also made Souki’s import terminal virtually worthless. In his book “The Frackers,” the reporter Gregory Zuckerman later recounted how Souki looked out at the crowd during the ribbon-cutting ceremony for the Sabine Pass facility only to see his investors and supporters staring at their BlackBerrys. They were watching Cheniere’s stock price plummet in real time.

The only way for Souki to save the investment was to turn the facility around, reconfiguring it to liquefy the natural gas from fracking and prepare it for shipping. This was not a matter of flipping a switch. Condensing natural gas into a liquid is much more complicated and energy-intensive than converting liquid back to gas, and retrofitting the terminal required Souki to raise an astonishing $20 billion from bankers and investors, many of whom had been involved in the first round of financing and hadn’t yet recouped their initial investment. Furthermore, the idea of an export terminal cut against most people’s understanding of America’s role in the global energy ecosystem. In the decades since the 1970s oil embargo, the United States had tried and failed to achieve energy independence. It seemed ludicrous to think that the nation should now hawk natural gas to other countries when just a few years earlier it was scrambling to find enough of it. “This is somebody who enjoys being on a roller coaster,” one oil analyst told a Times reporter in 2011, referring to Souki. “It is more likely to see snow in New York in July than to see exports of gas from L.N.G. terminals in the United States.”

Souki pushed ahead, though, and soon Cheniere’s gargantuan export facility was rising up out of the bayou, its hulking steel pipeline arrays and rotund storage tanks looming over the swampy water. Even before its first shipment left, it was clear that Souki had finally placed the right bet. Overseas demand for natural gas was only getting stronger as countries began to shift away from their reliance on coal power. European countries could get most of their gas by pipeline from Russia, but giant Asian economic powers like China, Japan and South Korea needed another way to import the fuel. When completed, Cheniere’s export facility would be the only such facility in the mainland United States, giving Souki an effective monopoly on the market. In 2013, he became the nation’s highest-paid chief executive, netting an annual compensation of $142 million.

“From here on,” he told a Houston newspaper at the time, “it’s either good or better.”

The United States is now one of the largest exporters of liquefied natural gas, dominating the global market alongside countries like Qatar and Australia. As of April, the nation was shipping out around 12 billion cubic feet of liquefied gas per day, equivalent to the daily gas consumption of Britain. There are now seven active liquefaction terminals, and as many as a dozen more are in various stages of planning and construction from Brownsville, Texas, to Jacksonville, Fla. The United States has flooded the world with supply, helping to double the global volume of L.N.G. exports between 2015 and 2019. Japan and South Korea have built dozens of regasification terminals over the past decade, and China has quintupled its natural-gas imports over the same period. Natural gas has emerged as a kind of Goldilocks fuel for power generation: less polluting than coal and less disruptive than switching to renewables. In other words, it’s the best of the worst.

Gas is also the most recent arrival to the world’s energy markets. Like its elder siblings coal and oil, it forms over tens of millions of years under the surface of the earth, but unlike these fuels, natural gas is mostly methane, which contains fewer atoms of carbon than the molecules that make up oil and coal. Burning it releases less carbon dioxide into the air as a result. To the extent that we replace coal power with gas power, we reduce carbon emissions by about half. This is already happening in the United States, where power-sector emissions fell by about one-third from to 2005 to 2019 as a result of coal-to-gas switching, and in China, where a state-led program to phase out coal has improved air quality in Beijing.

In the early 2000s, gas producers and energy-friendly politicians pointed to the relatively low carbon profile of gas as evidence that it could serve as a “bridge fuel” that could fulfill the world’s energy needs while we transition from fossil fuels to renewables like solar and wind. Souki makes another moral pitch for liquefied natural gas, which is that it can also displace fuels in the developing world that pose more immediate health dangers. “People in Africa die from indoor pollution because they use wood and cardboard to prepare their meals,” Souki told me. “There are people in India that die of outdoor pollution.” There, dozens of coal-fired plants operate 24 hours a day, blackening the skies over New Delhi and Mumbai, leading to almost 80,000 premature deaths per year, according to one analysis. “So if you restrain or restrict energy to the people who need it, you’re killing them.”

Cheniere’s Sabine Pass liquefied natural gas facility in Cameron, La. Growing demand abroad has driven a rapid expansion of L.N.G. infrastructure.
Benjamin Lowy for The New York Times

This is a somewhat unorthodox pitch for a fossil-fuel tycoon to make, but Souki has never been an ordinary tycoon. He is as easy to find in Aspen, Colo., as he is in Houston; he frequently talks to reporters and is frank about climate change. In 2012, as Exxon Mobil’s chief executive, Rex Tillerson, was calling environmental groups “manufacturers of fear” about global warming, Souki was declaring his support for a carbon tax. As the rest of the world has sought gas as a substitute for coal, the American L.N.G. industry has begun to position itself as a purveyor of clean energy. Cheniere, for example, hired one of President Barack Obama’s climate advisers, Heather Zichal, to serve on its board of directors. A former senior vice president of the company was a deputy assistant energy secretary in the Obama administration; its vice president for public affairs used to work for Senator Edward J. Markey of Massachusetts, a noted climate hawk.

One wrinkle in the bridge-fuel argument, though, is that unburned methane itself is also a greenhouse gas — in fact, during the first 20 years after its release, it is more than 80 times as powerful as carbon dioxide at warming the climate. You don’t have to be a chemistry professor to understand the conundrum. If you can get the gas out of the ground and into a power plant without letting it leak, it releases less carbon than coal or oil. If you let too much of it escape into the atmosphere while producing it, though, you might damage the climate more than if you just left it in the ground and burned coal instead.

Methane leaks are possible at almost every point in the supply chain. The point of production carries the biggest risk, when frackers push the gas out of the ground and shove it into pipelines. Still, leaks can also happen as the fracked gas travels through hundreds of miles of pipeline on its way to the Gulf of Mexico: In January, a satellite spotted a large methane plume that seemed to be emanating from a cluster of pipelines in central Louisiana. There’s also the potential for methane to escape at the liquefaction facilities themselves. An export plant in Louisiana owned by a company called Venture Global leaked almost 100 tons of natural gas over the course of two days in January. The methane involved had the potential to warm the earth roughly as much as 1,000 cars do over an entire year.

Critics also say the facilities pose significant risks for those who live near them. In June, an export facility in Freeport, Texas, had a leak that resulted in a “vapor cloud” of natural gas that exploded in the open air, an accident that is expected to put the plant out of commission for three months. These vapor-cloud explosions have occurred at a few oil facilities in recent years, and safety experts have expressed concern about the potential for even larger blasts at liquefaction plants. Souki has been frank about the nastiness of the business that has made him so wealthy too: “I wouldn’t want an L.N.G. terminal next to my home,” he told Forbes in 2005.

Nevertheless, the growing demand abroad for American gas has driven a rapid expansion of L.N.G. export infrastructure in the United States, which has rewritten the rules for the global energy marketplace. For a long time, natural gas was burned close to where it was produced, but the explosive growth of the L.N.G. industry has turned the fuel into a commodity like oil, something that almost every country needs but that comes from only a select group. The countries that control the largest gas reserves also control whether hundreds of millions of people can keep their lights on and their furnaces lit. The geopolitical significance of this fact has become startlingly clear over the last few months. The Russian invasion of Ukraine sent global energy markets into turmoil overnight, severing a link between the powerhouse economies of the West and one of the world’s main suppliers of oil and gas. It was easy enough for countries like Germany and Britain to agree that they would give up Russian oil, because they could buy oil on tankers coming from anywhere, but finding more gas was not so simple. Almost half the continent’s supply came from Russian pipelines, and European nations couldn’t simply stop burning gas — not if they wanted to keep the lights on.

The United States wasted no time in positioning itself as a kind of white knight for Europe’s energy needs. As countries like Germany and Italy scrambled to find enough gas for next winter, the Biden administration promised to fill about one-third of the threatened Russian supply. The White House didn’t frame this rescue mission in climate terms, but selling gas to Europe is arguably one of the most significant climate policies enacted by the Biden administration. The substitute gas would keep European economies from falling back on coal, but it could also ease the pressure on governments to further build out renewable energy sources like solar and wind. Back in the United States, meanwhile, it would make gas companies very wealthy, even as the rapid pace of L.N.G. exports drove up domestic natural-gas prices and raised American energy bills.

Even though it was Souki’s audacious bet that helped create the L.N.G. boom, he may not end up benefiting from the crisis brought about by the war in Ukraine. That’s because, at least for the moment, he doesn’t actually own a liquefaction facility. In late 2015, just two months before the first gas shipment left Cheniere’s plant in Sabine Pass, the company’s board ousted him. The move came at the behest of the activist investor Carl Icahn, who had acquired a 13.8 percent stake in the company and thought Souki was taking it in the wrong direction. Souki wanted to use the proceeds from the first terminal to build another terminal in Southwestern Louisiana and expand into other ventures; Icahn wanted to cut spending and pay dividends. After a 10-hour private session that Souki was not invited to, the board sided with Icahn.

Souki retreated to Aspen, but his time in the wilderness didn’t last very long. A few months later, he teamed up with another L.N.G. executive to found a new company called Tellurian and laid out plans to build an export terminal in Southwestern Louisiana — indeed on the very same site he had been pitching while still at Cheniere. He had a new financing scheme in mind, one that would entail greater risk but also yield mind-boggling profits: While Cheniere had charged frackers a fee to turn their gas into liquid, Souki wanted to start his own fracking operation, liquefy his own gas and sell it directly to overseas buyers.

‘The world is screaming for natural gas, and I would like to be able to deliver natural gas as soon as possible.’

“I felt that there was one more chapter to be written,” Souki told me. “The real business model would be to own the American molecules and sell them on the global market.”

As he searched for financing, Souki turned himself into an online evangelist for liquefied natural gas, posting regular updates on YouTube (“Two minutes with Charif Souki on supporting our European friends”). These videos have helped attract many of the same retail investors who poured money into companies like GameStop and AMC, and who now believed that Tellurian’s stock was underpriced relative to the potential payout. One video showed Souki flying in a helicopter over Louisiana, pointing out the vacant field where Tellurian’s facility would someday stand. Getting it up and running was imperative: Tellurian had a productive fracking operation in the woods of the northern part of the state but still no way to bring the gas to market.

Souki still didn’t when I met him in early February at Tellurian’s office in downtown Houston. The company has a small space in a building owned by the oil supermajor TotalEnergies, and from the upper-story conference room, Souki and I could look out and see the distant expanse of the Texas City oil complex, a warren of storage tanks and refineries spewing bright orange flames. Despite all the hurdles Tellurian was facing, Souki had an unflappable air about him and spoke with the kind of blasé confidence one might expect from a man accustomed to raising billions of dollars for long-shot projects. He was wearing one of his trademark double-breasted suits, along with a pink tie, and as he talked he sometimes removed a retractable ballpoint pen from his jacket and fidgeted with its clicker.

I wondered why Souki was so determined to get back into the L.N.G. business. After all, he had already made a fortune, and the industry he started was reaching maturity. Tellurian was still several years and billions of dollars away from being able to profit off it again. Why didn’t he just stay home in Aspen?

“The world is screaming for natural gas,” he said, “and I would like to be able to deliver natural gas as soon as possible.” There was already an energy shortage in Europe over the winter, a result of a fast pandemic rebound, and people in Britain were worried about paying their gas bills — how could he not want to supply them with more fuel? Moreover, he said, “the emerging countries are going to add two billion people, and their standards of living are improving all the time. They’re not going to say, ‘I don’t want to live like you.’”

As Souki sees it, the need to provide the world with energy in the short term outweighs the long-term demand of acting on carbon emissions. The world may be facing energy and climate crises, he said, “but one is going to happen this month, and the other one is going to happen in 40 years.” He added: “If you tell somebody, ‘You are going to run out of electricity this month,’ and then you talk to the same person about what’s going to happen in 40 years, they will tell you, ‘What do I care about 40 years from now?’”

Two weeks later, Russia invaded Ukraine. The booming American L.N.G. industry rushed in to fill the gap left by Russian gas, turning its focus from Asia to Europe. Cargoes that had already left American export facilities bound for Japan or China changed course and headed to France and the Netherlands, fetching multiple times the price they would have just days earlier. A few weeks after the invasion began, the United States and the European Commission announced a long-term agreement to help Europe free itself from Russian gas, with American producers promising to supply at least one-third of what Russia had once provided the continent. Bulgaria, Germany and Greece all raced to build new import terminals so they could accept American gas before winter, as Russia cut off gas deliveries to one country after another; eventually, Germany was moving to flip on old coal plants. Just a few months earlier, at the United Nations Climate Change Conference in Glasgow, these same European governments had affirmed their intention to give up fossil fuels, but now they had to shelve those ambitions.

I met Souki again in April in New York, at the downtown offices of a media-strategy company. Souki was taking advantage of the chaos in energy markets to again make his moral case for sending fracked gas all over the globe: He was stopping in New York to talk to potential investors and develop a new media strategy for Tellurian before he went down to Washington to meet with policymakers and legislators. We huddled together at a conference table in the lobby.

“All of a sudden, Europe has put all of its climate aspiration on the back burner,” he told me, reviewing the early events of the war. Countries like the Czech Republic, Italy and Romania were warning that they might have to reactivate their shuttered coal plants or extend the life spans of those that had been scheduled to close. “We’re going to need gas,” he said, “especially if you’re serious about climate issues.”

He was quick to clarify that this wasn’t his concern. “As a company, I couldn’t care less about the climate,” he said. “Of course I care, OK? But my responsibility is not to care about the climate. My job is to make a product that people need and sell it to them at the cheapest possible price to me.” This was not going to be very difficult, provided Souki could finish his new facility. By the summer, gas prices in Europe were six times as high as in the United States; once Souki’s terminal was up and running, he would be able to reap the entirety of that price differential, a jaw-dropping arbitrage. Yet again, he would have proved everyone wrong.

Still, the facility in Louisiana would need to export gas for years to pay itself off, which meant that Tellurian would need to keep fracking more gas to supply it, and that people around the world would need to keep buying and burning that gas, dumping more methane and carbon dioxide into the atmosphere. Souki’s gamble depended on the energy transition moving at a very specific pace, neither too fast nor too slow — his customers were countries that wanted to move away from the dirtiest fuels but weren’t ready or willing to shift toward altogether clean energy. For as long as the transition moved at this halting pace, it would be gamblers and tycoons like him who set the course of global climate policy, selling people the fuels they wanted for as long as they wanted them. Souki himself might have an exit strategy, but the industry he created would outlast him, spraying flames into the night sky for decades to come.

I asked Souki what he thought the long-term trajectory of the L.N.G. boom might be. The fuel might be necessary right now, but what about in 20, 30, 40 years? He was betting that the world wasn’t ready to give up fossil fuels. But someday it would, and the facilities he built would be effectively useless. What would happen then?

He smirked and waved his hand, as if to swat the question away.

“I’ll be dead,” he said, “so it won’t matter.”

Jake Bittle is a reporter who lives in Brooklyn. His book about climate migration is forthcoming from Simon & Schuster.