SOUTHWEST PASS (KPLC) - Just this week, Sasol announced it will delay part of its chemical plant expansion, as the company deals with the impact of low, crude oil prices.
So could those low prices impact other projects? KPLC posed that question to the top man at the company that wants to build Magnolia LNG in Lake Charles.
"Most of the contracts globally are tied to the oil price as a percentage. Typically with the decline in the oil price, we need to see some recovery before people are going to commit to long-term," said Maurice Brand, president and CEO of Magnolia LNG, a subsidiary of Australia's Liquefied Natural Gas Limited.
Currently, the price of crude oil per barrel is $38.50, according NASDAQ.
This recent fall in prices have affected companies around the world and locally – companies like Sasol, who reported a decline in its profits on Monday.
But Brand said the prices do not deter him from moving forward.
"Unfortunately, most of the analysts seem to get it wrong. For instance, one major investment firm was predicting $16 oil early in January, so nobody wanted to talk about oil or LNG. The wide range of variations on prices is just too wide for people to make major investment decisions; certainly needs to be narrowed," Brand said.
Nearly 250 million metric tons of liquefied natural gas were shipped around the world last year, but a recent report shows a drop in the demand for LNG but Brand is not discouraged.
"We are probably going to be the next group to receive all our approvals; we are well-placed to proceed; we are well-placed to start construction really as soon as we get all our final agreements signed off - hopefully this year. The world market is going to eat that up over time; most analysts are predicting an increase from 250 to 500 million tons over the next 30 years, so clearly growth is going to happen in the LNG industry and Lake Charles is a well place to participate in it." Brand added.
Brand believes by the time the project is completed, the price of crude oil will not be a factor.
"Over a four-year construction period, we will be timing the release of our product to the global market right around the time the imbalance of LNG supply and demand will correct itself and there will be a major increase in demand," Brand stated.
He said there are several reasons why Southwest Louisiana is a prime location.
"It's the abundance of natural gas you have in North America, the abundance of pipelines systems and then geographically; the U.S. or North America sits wonderfully between Europe, on the one hand, and Asia on the other," Brand stated.
Brand said he understands the concerns some local residents may have when it comes to the living locations for outside workers.
"Generally speaking, we do believe the community is well placed to absorb that number of folk we require in the timeline. There's nothing worse than people building a lot of infrastructures to support and then they leave town and suddenly you have these empty buildings and empty houses, so we think we are well-placed with our workforce to manage that," Brand said.
Magnolia LNG will be the second Greenfield project - something that Brand is proud of.
"It will have the smallest environmental footprint of any LNG projects being built in the world - for eight million tons. It will also be the most efficient LNG plant that's ever been built; what I mean by that is that it will have less greenhouse emissions and environmental impact than any LNG Plant that's been built previously," Brand said.
Once approved, the company estimates it will generate more than 1,000 construction jobs and several permanent jobs.