(Bloomberg) — The US Gulf Coast is probably the only place in the world where two men with virtually no experience running an energy business could upend a vast industry while becoming billionaires in the process.

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Little more than a decade ago, ex-banker Mike Sabel and lawyer Bob Pender were driving across Texas in a rented Chevy to raise money for something that no global energy major, let alone a little-known startup like theirs, had ever pulled off: building a multibillion-dollar plant to liquify and export US shale gas.

In an industry dominated by supermajors and petrostates, the two outsiders realized their vision. Today, they own Venture Global LNG and are on pace to become one of the country’s biggest suppliers of the fuel. Their ascent tracks the country’s LNG industry. In the span of about eight years, the US has surpassed Australia and Qatar as the biggest exporter of the fuel.

The question now is whether their company can sustain its pace of growth amid political pressures and an attitude toward customers and rivals that has ruffled feathers.

“We just grind through it,” Sabel said in an interview at the company’s massive $21 billion LNG plant that’s in the final stages of construction in Louisiana, its second such facility. “We look up and often we’re very surprised by the progress.”

Venture Global’s bet hinges on the key idea that countries moving away from oil and coal will struggle to go all-in on renewables. As they seek alternatives, the answer will be LNG, given its reputation as a cleaner-burning fuel. That’s not a unique thought — the industry widely expects gas’s importance to grow, with Shell Plc forecasting LNG demand to swell by more than 50% through 2040.

What’s new, though, is the way they’re going about it. Sabel, 57, and Pender, 71, have redrawn nearly everything, from the design of their facilities to the way they handle customers, including long-term ones who’ve yet to receive any contracted shipments during the first two years of output.

“They came out of nowhere, total dark horses,” said Susan Sakmar, a University of Houston visiting law professor who’s written a book on LNG. “It remains to be seen that they are the disruptors they claim to be until they give buyers their cargoes.”

For nearly half a century, the process of building terminals to export gas went largely unchanged: state-owned energy firms or big oil companies took on the financial risk to construct huge plants that lower the temperature of the fuel to -260F (-162C), which liquefies it so it can be loaded onto tankers and shipped abroad.

The shale boom upended those economics, shifting the advantage sharply to the US and opening the door to entrepreneurs from outside the industry. Gas became cheap and readily available there, and a vast web of pipelines made it easier to access than anywhere else. After the 2011 Fukushima disaster, Japan rushed to lock in supply of gas to replace nuclear plants, giving a boost to a crowded field of US LNG hopefuls with plans to retrofit import terminals into export facilities or build new plants.

There are few engineering endeavors in fossil fuels more complicated or expensive than an LNG facility, and dozens of companies tried — often unsuccessfully — to enter the sector that has previously been the exclusive realm of nation states and international energy firms.

Around this time, Pender — a Washington, DC, attorney who served as a White House law clerk during the Carter administration — and Sabel, who spent decades in investment banking and commercial finance after dropping out of University of Michigan, were looking for a project.

They were industry unknowns but saw an opportunity. The existing LNG industry’s designs were too clunky, they thought. So they modified them to run using a larger number of smaller units, or trains. They chose a modular design, too, allowing factories to fabricate difficult pieces and later combine them like massive Legos on site, promising a faster ramp-up and less downtime for maintenance.

It was a long shot, with BloombergNEF deeming Venture Global’s first facility “highly unlikely” in a 2015 report. But the company got a key vote of confidence the following year when Shell signed a 20-year purchase agreement that then helped attract other buyers. Sabel and Pender brought those deals to banks, which in turn gave them financing.

“There is this fictional story about this boy in Texas that started with marbles and incrementally traded up to a used pickup truck,” said Sabel, who became Venture Global’s chief executive officer in 2020 after previously sharing the role with soft-spoken Pender. “That’s what we did.”

Its inaugural project, Calcasieu Pass, went from a final investment decision in 2019 to exporting fuel in just 29 months, making it one of the fastest LNG plants ever constructed. It was about $1 billion over budget, a relatively small sum compared to at least $17 billion in overruns at Chevron Corp.’s Gorgon LNG project in Australia. Venture Global’s second site, Plaquemines, is ahead of schedule and expected to begin producing LNG in the next few months, roughly two years after its decision to proceed with phase one. The industry average is about four to six years.

From the two plants alone, Venture Global is poised to produce 30 million tons of LNG a year. That’s about a third of the US LNG market today. If the company’s two additional early-stage projects move forward, it has a chance to challenge rival Cheniere Energy Inc. as the country largest LNG exporter, shipping some 70 million tons a year — near striking distance of the volumes shipped last year by Qatar. Longer term, it’s hoping to push that number to 100 million tons.

“VG took a big risk by adopting this novel design,” said Amit Kshatriya, an LNG consultant with 17 years in the oil and gas industry. “It seems to have paid off.”

Pushback from multiple fronts threatens to derail the company’s plans.

In September, environmentalist writer Bill McKibben published a scathing commentary in the New Yorker urging the Biden administration to scrutinize regulatory approvals for LNG export projects. He called CP2, Venture Global’s next project, a “poster child for late-stage petrocapitalism.”

In January, as environmentalists ratcheted up their campaign against LNG and Biden pushed to burnish his climate credentials with young voters, the administration announced it was suspending the approval of new licenses to export LNG. Venture Global — which is headquartered less than three miles from the White House in Arlington, Virginia — had become the center of a pitched political battle.

The Federal Energy Regulatory Commission on Thursday gave CP2 its approval, but the project — which already had contracted buyers — still needs an export license from the Energy Department. Most industry insiders don’t expect the permitting delay at the DOE to be lifted until after the 2024 election, since a decision in either direction risks turning off some voters.

With little clarity, importers are increasingly looking into alternative suppliers including the United Arab Emirates and Norway. Some would-be buyers may abandon the US altogether.

“They are concerned that the US is not a reliable partner,” said Octavio Simoes, a US LNG industry veteran who was an executive at Sempra LNG & Midstream and then Tellurian Inc. “The uncertainty is an issue.”

Unhappy customers

Even if the permitting suspension derails CP2 — a worse-case outcome that Sabel says he isn’t expecting — the White House’s order won’t be able to ding profitability at Plaquemines or Calcasieu Pass. Unhappy customers might.

In the years before the first plant came online, global energy titans including BP Plc and Shell signed multi-decade agreements worth billions of dollars to buy cargoes at prices significantly lower than today. Then, right as Venture Global was readying to ship its first cargo in spring 2022, Russia invaded Ukraine. The attack upended the global gas market and drove the price of LNG to an all-time high. A single shipment was suddenly selling into the spot market for more than $200 million, ten times what a similar-sized cargo would have gone for a year before.

Calcasieu Pass’ contracted buyers — which also include Italian utility Edison and China’s Sinopec — were anxious to begin receiving the shipments they’d ordered at rock-bottom prices. They never got them. The more than 300 shipments to come out of the plant since it began operating, each valued at tens or even hundreds of millions of dollars apiece, have all gone to the spot market.

Venture Global contends that’s fair game. Under the terms of the contracts, the company isn’t obligated to deliver to its long-term customers during the so-called “commissioning phase,” when kinks are worked out. That phase generally lasts a few months. But because Calcasieu Pass has 18 mini production trains that each require testing, it’s been in commissioning for two years and counting. An issue with a part of the facility resulted in Venture Global declaring force majeure in 2023, and long-term customers have been told the repair period will last through 2024. Sabel said Shell and others knew that the commissioning would be longer than other plants because of their novel technology.

Not all customers agree. “‘Fast to build and indeterminate commissioning’ is not a slogan that would have attracted our business,” said Curtis Smith, a spokesperson for Shell in North America. “Deciding not to honor the very contracts that put them in business is not disruption. It’s deceit.”

Customers have gone from impatient to livid, especially since the facility was able to use a temporary power setup to continue shipping spot cargoes during the force majeure. Shell filed a case with an arbitration court for breach of contract; others have followed suit. Customers are also asking US regulators to deny an extension of an order that they say allows Venture Global to sell commissioning cargoes into the spot market.

“It’s simply not credible to operate for over a year and claim firstly that you’re not in commercial operation,” Steve Hill, then a top LNG executive at Shell, said during the world’s biggest natural gas conference in Singapore in September.

Even as it risks going head-to-head with Big Oil, Venture Global remains undaunted. “We’re a challenging competitor,” said Sabel, who operates in an industry known for luring big personalities that depend on make-or-break tactics of showmanship. “A lot of what’s said are inaccurate, unfair misrepresentations.”

@SStapczynski explains https://t.co/SbM5xIeIj3 pic.twitter.com/5qPE5V7xer

— Bloomberg (@business) June 27, 2024

Still, multiple arbitration cases with several of the world’s biggest oil companies isn’t good for business. It’s been a year since Venture Global has signed a new, binding long-term contract. Anatol Feygin, chief commercial officer of rival Cheniere, says global buyers have started to incorporate terms to their contracts to prevent the kind of public dispute that’s taken place at Calcasieu Pass.

“We’re very transparent, and we are incentivized and remunerated for having long-term relationships,” he said.

The once-in-a-lifetime gas boom means Venture Global’s founders have a chance of becoming some of the richest energy executives on Earth — assuming their mounting adversaries don’t knock them off kilter first.

It’s hard to estimate a valuation for the company, which is only producing from one plant that’s still in commissioning. In 2023, Venture Global earned $7.8 billion from spot sales, according to an analysis by Bloomberg based on data from the Energy Department. Together, Sabel, Pender and other employees own just over 90% of the company, they said. Pacific Investment Management Co. holds a minority share. JPMorgan Chase & Co. estimated in September that Venture Global could be worth as much as $100 billion. Venture Global declined to comment on its valuation.

As the company grows, Sabel has been jet-setting around the world, visiting customers abroad and government officials in Washington. He recently met German Chancellor Olaf Scholz and Japan’s Prime Minister Fumio Kishida and attended an energy security roundtable event at Mar-a-Lago with Donald Trump.

Sabel, a Republican, and Pender, a Democrat who’s married to a Kennedy, aren’t America’s inaugural LNG billionaires. First on the scene was Charif Souki, another little-known name at the time who founded Cheniere. In 2015, he was ousted from the company; Souki then founded Tellurian but struggled to capture lightning in a bottle a second time. Michael Smith, who founded Freeport LNG, was flying high until the facility exploded in 2022 and was forced offline for months, exacerbating a global gas shortage. Freeport, locked in a lawsuit against companies that built the plant over alleged defects, declined to comment.

After its rivals’ challenges, Sabel maintains the company’s future is not at risk. Still, its pending CP2 permit and arbitration cases have drawn the attention of Congress and the European Commission. FERC recently ruled Venture Global must disclose some confidential records to its Calcasieu Pass customers about the delayed commercial start.

The company is sitting on a pile of cash as it plots its next moves. Venture Global earlier this year acquired nine LNG carriers, giving it unusual control over transportation. It also secured a slot at a UK import terminal for 16 years starting in 2029. And it’s making strategic moves to put pressure on the Biden administration, announcing in June a non-binding deal to supply a Ukrainian energy company from its project still awaiting permits. It’s even mulling ways to self-finance CP2.

That’s a far cry from when the co-founders were driving door-to-door in a Texas rental car.

“You have to be an optimist,” Sabel said. “In order to be an entrepreneur, you have to enjoy the little bit of the fear and anxiety that goes with the challenges.”

—With assistance from Vernal Galpotthawela, Madlin Mekelburg and Andrew Heathcote.

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