Cheniere Lights a Match in the Gas Market

For a company that is yet to even build its plant, Cheniere Energy LNG sure is upending its industry.

David Calvert, Apache Corp.'s APA manager of a project to export liquefied natural gas, or LNG, from Canada's west coast, said this week that Cheniere has stoked unrealistic expectations among LNG customers. LNG is usually sold at a price linked to oil. But Cheniere, planning an LNG export plant in Louisiana, has made deals priced off U.S. gas, which is much cheaper.

Mr. Calvert's point reflects the very different sorts of companies Apache and Cheniere are. Apache is a gas producer. It wants to export gas from North America—where a glut keeps prices low—to Asia, where prices are linked to oil and much higher. Apache and its partners also must invest a lot upfront just to pipe their gas to the coast before it even gets liquefied, providing even more incentive to demand oil-linked pricing.

Cheniere, on the other hand, isn't a producer and largely insensitive to what price gas producers get for their product: It is essentially a middleman. For Cheniere, the cheaper the gas, the more volume is likely to pass through its proposed plant. And that plant is situated in a region crisscrossed with pipelines.

The potential entry of cheaper U.S. gas into the global LNG market has caused Asian buyers in particular to hold off signing new contracts with others, says Nikos Tsafos of consultancy PFC Energy. They are waiting to see how much gas exports the U.S. will allow, a politically contentious issue.

For the likes of Apache, Cheniere may well have created ripples in the market. The bigger issue is that getting past them may require a clear signal on energy policy from Washington. Those come along about as often as unicorns.