Cheniere Energy Inc. SWOT and PESTLE Analysis

Strength

1. Long-term contracts with fixed charges from its customers ensure financial support: Cheniere Energy Inc. has a provision for LNG sale and purchase agreement which needs to be followed to purchase LNG from the company. The agreement contract stipulates that the customer has to pay a fixed amount of sum on a long-term basis (usually 20 years) for a certain quantity of LNG and if the requirement exceeds the quantity, a certain charge (115% of the price in the USA) has to be paid per MMBtu (unit of energy). If the customer cancels the orders of LNG cargo deliveries, the same fixed price has to be paid. This ensures two vital aspects for the company. First, there would be a relatively low risk of inventory build-up, which would have been the case if customers could freely purchase any quantity whenever required. Second, there would be a constant financial gain from the fixed-price amounts for a long period. This feature is very effective in minimizing the instability a company normally faces during unforeseen situations.

2. Largest LNG producer in the USA and second largest LNG operator in the world: Cheniere is a prominent player in the energy industry, specializing in the production and distribution of liquefied natural gas (LNG). The company's mission aligns with the global aspiration for cleaner, secure, and affordable energy that promotes health and safety while reducing carbon emissions. Cheniere's contribution to this vision is through the production of LNG, which is pivotal in achieving these goals. Cheniere commenced its LNG operations in 2016, and in a relatively short span, it has established itself as a major leader in the industry. As stated in their provided information, Cheniere has attained the position of the largest LNG producer in the United States, making it a significant contributor to the country's energy sector. Moreover, the company has emerged as the second-largest LNG operator in the world, underlining its global influence and impact on the LNG market. Cheniere is not solely confined to its Texan and Louisianan facilities; it operates on a global scale. While its headquarters are situated in Houston, Texas, the company has established offices in key international cities such as London, Singapore, Washington, Beijing, and Tokyo. This global presence underscores Cheniere's commitment to serving the worldwide energy market and its readiness to meet the growing demand for cleaner and more sustainable energy solutions.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. LNG industry speculation as equivalent to the coal industry for affecting climate raises concerns: Global warming is a big challenge for all of us and all we can do is delay it as long as possible. Global warming is directly increased by all the heat produced from fossil-fuel burning, and also by the insulation effect of greenhouse gases, most importantly carbon dioxide and methane. It is a fact that LNG produces much less carbon dioxide (almost half) than coal, but scientific research validates that the effect of using both these fuels on global warming is almost equivalent. The reason behind this belief is the assumption that methane, the chief constituent of LNG, leaks out into the environment in the production as well as usage processes (2-3%), and that contributes to the greenhouse effect. Methane has 28-fold warming power as compared to carbon dioxide and hence such a small quantity produces tremendous heating within the atmosphere. It is a matter of time for this issue to gain a bigger spotlight and trigger public controversy among climate activists. Regulations would be imposed strictly on usage and production, affecting the LNG industry. Cheniere Energy is involved in LNG production primarily, and it is time for the company to enter into some alternate products and services as well.

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