DALLAS – The always outspoken James “Jim” K. Wicklund, Parks Paton Hoepfl & Brown (PPHB) managing director, has some frank opinions about LNG projects from Louisiana to the Vaca Muerta in Argentina. Not everyone will be pleased.

Not one to mince words, Wicklund gave his assessment of LNG projects from the U.S. and Canada to Trinidad and Argentina. Some projects, he said, are more about prestige than money. Others are more promising, and profitable.

Wicklund spoke in Dallas on the sidelines of the recent A&D Strategies & Opportunities conference with Pietro D. Pitts, Hart Energy’s international managing editor.

Also on his radar: Tellurian’s Driftwood LNG thesis; the need for caution regarding Mexican LNG; and why the world needs to invent the climate change equivalent of a “Star Trek” warp drive to meet 2050 net zero goals.

Pietro D. Pitts, international managing editor, Hart Energy: What does it mean for U.S. producers to be able to sign on to long-term LNG contracts, especially in Europe or Asia?

Jim Wicklund, managing director, Parks Paton Hoepfl & Brown: Surety of market. The biggest problem has always been the lack of stability in our industry. Several people said that at the meeting [Oct. 3]: If we just have a stable oil price or a stable gas price, it would be better than having a really high oil or gas price. And that's true. The long-term contracts represent the stability of the market that we've been aiming for. And if you're drilling a well in Haynesville and you're worried about, where do I put all this gas other than just dropping my domestic price, I'm now working on what will be normalizing arbitrage over time. The more LNG I export, the more I normalize, bring down the international price and bring up the domestic price. The more LNG we ship, the higher price U.S. producers get for their gas in addition to the surety of the markets.

PDP: How important is it now for U.S. gas producers to think about international markets for their gas, be it through Europe, Asia or Mexico?

JW: Right now, LNG is closer to 12% of U.S. production. I know we still export gas to Mexico and other places, but LNG exports are growing and 12% is a huge number when you're talking about such large things. I mean a 2% inflation rate going to an 8% inflation rate is huge. But if you look at the same relative moves over 12%, it's huge. So, it matters.

PDP: When we talk about the U.S. LNG producers, do you expect a lot of the deals that have been announced and that are planned to really come through by the end of the decade?

JW: I do. I don't see any impediments. The biggest impediment was going to be the financing of them. So far, they've been able to sign long-term contracts and get project financing.

PDP: We’ve seen three deals already this year.

JW: Exactly. The last one was $18 billion. So, we're getting financing. There was actually a school of thought that still exists that because of [President Joe] Biden's promise of LNG to Europe, along with [Canadian Prime Minister Justin] Trudeau's promise of LNG to Europe, even though Canada doesn't currently produce any LNG, was that you may have to use MARAD [Maritime Administration, U.S. Department of Transportation] financing to build some of these U.S. LNG facilities. Basically, getting the U.S government to guarantee the loan just to fulfill his promises to Europe. Now so far, the financial markets have been such that we haven't had to do that, but in a changing interest rate environment, who knows what's next.

PDP: And that couldn't be fulfilled via Mexico LNG exports that use U.S. gas?

JW: That's correct.

PDP: While the U.S. has emerged as a big-league LNG exporter, the country still relies on LNG imports from Trinidad and Tobago.

JW: When you think about where we're importing it into – Boston, the state of Massachusetts, won't let us lay a pipe, nor will New York. Either they get gas from that regas facility that's sitting within sight of downtown Boston or they have no power at all. The U.S. trade agreement was originally started to be nice to Trinidad and give them a market. So, there's favored nation status all over that situation. But mainly without that, the Northeast would lose a huge source of LNG, natural gas, availability through the Boston facility.

PDP: How do you view the build out of LNG export facilities on Canada’s west coast and then the competition potentially between the U.S. and Mexico for Asian markets in the future?

JW: An LNG Canada project is already well underway because it's been able to sign enough contracts to get project financing money. Who they sell their gas to, it's pretty much a foregone conclusion. I don't know offhand how much they're saving for the spot market, but considering the banks aren't just throwing money around these days, it's probably not much. There are two LNG efforts trying to get underway that are looking at putting it in smaller containers and putting it on container ships as opposed to big LNG ships for use in remote locations in Asia. That hasn't gotten completely funded yet. And if you remember back seven years, there were four different LNG facilities planned for the west coast of Canada, and none of them came about in part because the tribal nations couldn't come to an agreement. But in the projects that are going on now, the nations are actually partners. And so that's why you're seeing that start to develop.

PDP: In terms of developing a LNG project like Tellurian Inc.’s Driftwood project, is it more important to have equity partners or off-takers or are both equally important?

JW: They're both important. Tellurian has a different business model in that they're trying to be vertically integrated by owning the natural gas production Haynesville properties, as well as the LNG facilities. And that is a different business model and that spooks a lot of lenders. So far it has spooked a lot of equity players too. I think the financing and the banks have left him [Tellurian Chairman Charif Souki] no choice but to try and raise equity and he's having very little success doing it. And at one point I was as hopeful and optimistic as anyone else, and when they explained to you the logic of the vertical integration, it makes sense. But then you can explain a lot of things that make sense in theory, but don't work in practice. And it has not been very well received at all [as] demonstrated by his inability to raise capital. So that's going to continue to be a challenging model.

PDP: Would it make sense to spin off the upstream segment to move the project forward?

JW: I'm sure it's been raised.

PDP: When it comes to profits, and what you have to do as a company, that sometimes takes precedence over the environment, right?

JW: Yes. Investors often choose a higher return investment over an investment that has a low return but is more green.

PDP: So how do we get to net zero for 2050 around the world, if that's still kind of the sentiment that we still see?

JW: There is no way on God's green earth we can get to net zero by 2050 unless somebody identifies warp drive or whatever “Star Trek” did to move people around with the technology that is even leading edge today. There is no way we can get to net zero by 2050. Can we work toward that as a goal? We already are. Can we get there? No.

PDP: Venezuela’s flaring just over 2 Bcf/d of gas into the environment. From a climate change perspective shouldn’t that be an issue for Washington to consider in terms of easing sanctions to try to allow perhaps Trinidad and Tobago to capture and use that gas?

JW: Yes, there are environmental funds out there on a global basis who will definitely loan money at ridiculously low prices to do environmentally beneficial things and that would be one. The problem, as you mentioned, is the dictatorship called Venezuela, and that has not been an actual magnet for capital lately. The answer, if you were almost any other country, would be absolutely. You're back to politics and that's going to be a challenge.

PDP: How do you view Argentina and the idea of the country becoming a LNG exporter and then how does the Vaca Muerta gas compete with gas sourced from the Permian? How do they compete on the LNG side of things?

JW: Well, they can't on price, and that's the problem. You've got a country with runaway inflation even today, so their [LNG] plant is going to cost a whole lot more than was the original plan. If the idea is to generate a positive return on invested capital that’s going to be a challenge. And yes, while the rocks are very similar to the Permian, the ease of getting gas out of the ground into a pipeline and to a Cheniere [Energy] plant in Corpus Christi [Texas] is a whole lot easier than getting it out of the ground through a pipe to the LNG facility in Argentina considering the union issues, the political issues [that] make it more expensive for a feedstock. And they would operate at lower margins and significantly lower returns than competing projects in North or South America. Now, we have seen with things like the IRA [Inflation Reduction Act] in the U.S. that governments can fund, can subsidize losing projects for rationalized reasons all over the place. And the idea of the stature that it would give Argentina to be an LNG exporter and put them up on the board with the real players, I think the Argentine government would probably be willing to sacrifice margin to get that done, and the partners would not be happy. They wouldn't have a lot of choices and they’d have to make promises about the future.

PDP: How do you view Mexico developing its LNG projects anchored by U.S. Permian gas?

JW: I think it's going to be a challenge. I know that [TechnipFMC] has a contract to build a facility, and so the facility will get built. The politics of Mexico are always so capricious, it’s difficult. The surety of supply to LNG facilities, when you know it can be nationalized at any point in time, means contracts don't really mean anything. The risk factor is significantly higher. And I'm sure that was expressed in the cost of the capital [related to Mexico Pacific’s project].

But Mexico is struggling and trying desperately to generate more revenues from its energy reserves. Its oil production has been in decline for several years now, and they can't seem to arrest that. Pipelines from the U.S. through the center of Mexico and down to the bottom have been proposed for years and nothing's ever happened. Because the capital commitment to the LNG facilities, they're not going to have any choice but to actually make it work. The only issue I have is how much energy is needed in Mexico. So instead of using it domestically, which would've been ideal, they're doing the LNG ship out for hard currency. So, they're caring more about the general fund than they are the overall economy. But it's politics.

PDP: There's politics in Mexico and then there are also Mexican cartels in the northern part of the country. Does that raise a flag for you as well in terms of security and projects securing financing?

JW: It has to. I mean, as long as we don't interdict their drug trade, people say, well, it won't matter. If there's an economic opportunity for them to hold something hostage and make money, we would be foolish to think they wouldn't do that. Is it a risk? Absolutely. I'm going to have billions of dollars of things flowing through pipelines to a location on the coast. And whether you see that as natural gas or dollars … I would think it's all being priced in.

PDP: Trinidad and Tobago’s government is seeking to source Venezuelan gas to feed its Atlantic LNG export facility. How do you see that playing out considering the ongoing U.S. sanctions on Venezuela?

JW: Well, you saw the U.S. sanctions for Venezuela were bent dramatically for Chevron. And when you talk about energy security, whether it's the Willow project in Alaska or whether it's leasing restricted—but still leasing the Gulf of Mexico from a president who said he was going to end all of that—there is a level of practicality, especially lately on energy security. And I just don't see if we're willing to make a deal to let Chevron go back to producing, then again, I'm back to favored nation status, [and] would the U.S. be willing to help Trinidad or help Venezuela or Chevron develop gas reserves for Trinidad? We've seen all over the world [after Russia’s invasion of Ukraine] that no one will buy Russian oil and China and India are loving the heck out of this. I think it happens. It just gets a little twisted around from where we look at it today.