How one restaurant owner changed the energy business in the United States.
Charif Souki took a chance on liquid natural gas, or L.N.G., which turned out to be a good bet. This made the United States a major exporter of fossil fuels.
If you wanted to tell the story of how the United States became one of the world’s largest exporters of fossil fuels, you could start in the Middle Devonian period, about 400 million years ago, when a warm inland sea filled 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 sediment.
Or you could start with Nicole Brown Simpson’s death.
Simpson had dinner with some family members on June 12, 1994, at an Italian restaurant in the Brentwood neighborhood of Los Angeles called Mezzaluna. Ron Goldman, a waiter at the restaurant where Simpson’s mother left her glasses, went to Simpson’s house to give them back. Goldman and Simpson were found dead outside of her condo just after midnight. After the murders, reporters, photographers, and buses full of tourists came to Mezzaluna to see what was going on. People came in to bug the staff about Simpson’s last night, even asking waiters what she had for her last meal (apparently rigatoni). A Lebanese-American businessman named Charif Souki, who owned the restaurant, was disgusted by the media attention. “The morbid curiosity, the lack of taste and decency of people was pretty amazing,” he said later. He decided to sell Mezzaluna and try his hand at something new. After some thought, he decided to go into the oil and gas business.
Souki didn’t look like a Houston wildcatter. He had a messy head of hair and liked to wear fancy double-breasted suits. He didn’t know anything about oil or gas drilling either. But he did have a big Rolodex because he grew up in a wealthy family in Beirut, worked as an investment banker, and ran a restaurant for famous people. Why not get some money together and give it a shot? The infrastructure that moved fossil fuels around and turned them into energy was unimaginably complicated, but the people who worked in the business did something pretty simple: they borrowed money, dug up fuel, and tried to sell it. Souki didn’t think that was so hard.
At the turn of the century, there was no more growth in the American energy sector. Exxon Mobil and Chevron had already taken almost all of the oil and natural gas from the Gulf of Mexico. There didn’t seem to be a clear place to drill next, so not much new money was coming in. In fact, some experts and commentators were worried that the United States would not be able to find enough oil and gas to meet rising demand. It would be easy to buy more oil because tanker ships move millions of barrels of crude all over the world every day, but natural gas was a different story. About one-fifth of the US’s annual consumption was already coming from other countries, mostly Canada, and the pipelines could only carry so much. If the US couldn’t find more gas in its own country, the price of gas would go through the roof.
There is, however, another way to move natural gas. If you cool it to minus 260 degrees Fahrenheit, it turns into a liquid. This liquefied natural gas, or L.N.G., takes up about 1/600th as much space as regular gas, so it can be put on tanker ships and sent across the ocean. Before, the US didn’t need to import a lot of liquefied natural gas, but Souki thought that rising demand would soon make up for the costs. He had already built a small energy company called Cheniere as part of a failed attempt to find new oil and gas in the Gulf of Mexico. He decided to put all of his money on L.N.G. He called friends from his days as an investment banker and told them about a solution to America’s energy problems: a gas-processing plant that could “regasify” L.N.G. as it came in from places like Qatar and pump it into domestic pipelines. A lot of people thought he was crazy, but he found the money and didn’t take long to find a place for the $2 billion facility near a fishing town called Sabine Pass in a swampy area on the border of Louisiana and Texas.
Only problem was that he was wrong about everything. Around 2007, just as his terminal was getting close to being finished, a group of energy moguls came up with a new way to get gas out of deep layers of landlocked shale. Hydraulic fracturing, or “fracking,” could have released enough gas to meet America’s energy needs for generations and make the country the largest oil and gas producer in the world. It also made the import terminal in Souki pretty much useless. Later, the reporter Gregory Zuckerman wrote in his book “The Frackers” about how Souki looked out at the crowd during the opening ceremony for the Sabine Pass facility and saw that his investors and supporters were all looking at their BlackBerrys. They saw the stock price of Cheniere drop in real time.
Souki’s only way to keep the investment was to turn the facility around and change it so that it could be used to turn the natural gas from fracking into a liquid and get it ready for shipping. It wasn’t as easy as turning a switch. Condensing natural gas into a liquid is a much more complicated and energy-intensive process than turning liquid back into gas. To retrofit the terminal, Souki had to raise a staggering $20 billion from bankers and investors, many of whom had been involved in the first round of financing and hadn’t yet gotten their money back. Also, most people didn’t think an export terminal fit with what they knew about America’s role in the global energy ecosystem. Since the oil embargo in the 1970s, the US has tried and failed for decades to become energy independent. It seemed crazy to think that the country could now sell natural gas to other countries when just a few years ago it was struggling to find enough of it. In 2011, an oil analyst told a Times reporter about Souki, “This is a person who likes to be on a roller coaster.” “It’s more likely that it will snow in New York in July than that L.N.G. terminals in the United States will export gas.”
Souki kept going, though, and soon Cheniere’s huge export facility was rising up out of the bayou, with its huge steel pipeline arrays and huge storage tanks towering over the swampy water. Even before the first shipment left, it was clear that Souki had finally made the right choice. As countries started to use less coal to power their homes and businesses, the demand for natural gas grew. Most of Europe’s gas came from Russia through pipelines, but huge Asian economies like China, Japan, and South Korea had to find another way to get the fuel. When finished, Cheniere’s export facility will be the only one of its kind on the U.S. mainland. This will give Souki a monopoly on the market. In 2013, he became the CEO who made the most money in the country, with an annual salary of $142 million.