CSU Alumnus and Freeport LNG CEO, Michael Smith At Scholarship Luncheon

CSU Alumnus and Freeport LNG CEO, Michael Smith At Scholarship Luncheon


– We have several people here today whom I asked to say a few
words, and they all agreed. So we’re gonna hear from
three, actually four people. The first is Mr. Michael Smith. Michael Smith may be a very common name, but there is nothing common
about this Michael Smith. Mr. Smith is an energy entrepreneur whose academic and business
roots are here in Colorado. He attended CSU in the 1970s, majoring in chemistry with
a minor in mathematics. He received the Doctorate
of Humane Letters from CSU in 2008. He is the chairman and chief
executive of Freeport LNG, which is completing a liquid
natural gas export facility based in Freeport, Texas. I had the opportunity
to tour the facility, and I can’t even express
how massive it is, I’ve never seen anything like this. It’s so impressive, the
operations are impressive, and it’s all because of this Michael Smith with the common name. So Michael told me much about his success, and he said a lot of it is
due to his education at CSU, and some is just due to luck and chance. Well, as Louis Pasteur, a
chemist and microbiologist, once said, chance favors
the prepared mind. Mr. Smith is clearly a prepared mind. The breadth and reach of the generosity from Michael and his wife
Iris to CSU is unparalleled. Their gifts created the Michael and Iris Smith Alumni Center, the Michael Smith Natural
Resources Building, which is going to have its, celebrating the grand opening
of it tomorrow afternoon, so you should all stop by for that, and he established 70 full tuition undergraduate scholarships at CSU, 10 of which are the Michael Smith Scholars here in the department, our
department of chemistry. I wanna thank him for believing in and investing in the university, and for his continued
commitment to excellence for Colorado State University students and certainly the College
of Natural Sciences. Please join me in welcoming
Mr. Michael Smith. (audience applauds) – Good afternoon everybody. Thank you, Dean Nerger,
for your kind comments, and thank you for your invitation to speak at today’s luncheon for the College of Natural Science for what is the 50th year
anniversary of the college. I actually was not here 50
years ago, 45 years ago, and thank you for those people protesting, ’cause in ’73 we were
drinking in the (mumbles). (audience laughs) Some of you old time folks
in the chemistry department, it’s interesting, I tend to
wait ’til the last minute for some stuff, and I was
working on this speech last night at close to midnight, and I had in the
background classic rock on, which is what I love to listen to, and just as I was finishing I could not believe that I was listening to Room to Move by John Mayall, who our esteemed chemistry
professor, who was my professor, Dr. Thompson, was the
bass player on that album, which is a very famous song in the ’60s. So anyway. But, looking back on life 50 years ago, not on the campus, but in 1968 the Internet was just a concept that actually started with
four sites the following year. 32 kilobytes of memory cost $8000, and now you can get a hard drive with about 30,000 times that
memory for less than $100. Most cancers were death sentences, and now most cancers are curable. Biochemists were just
in the embryonic stage of studying DNA, which was only discovered
15 years earlier, and now we have genetically
engineered drugs and foods. All of these amazing developments have come from computer science, chemistry, biology, biochemistry, which are all part of the
College of Natural Sciences. The world is a very different place now than it was 50 years ago. The advances in science and technology has changed the way we live and work. We no longer need to go to a store, we can go buy it online. We don’t need to own a
car, we can call Uber. We don’t need to buy a record album or call a travel agent
to make reservations. These are all benefits
of disruptive technology that serves as the foundation for an entirely new and
exciting industries, and has reduced the cost
of living for everyone. Of course, with these new
wonderful technologies comes consequences. Millions of jobs have been
lost, businesses closed, but new efficient businesses get started. This disruptive economy is affecting every business and industry, and this evolution is only accelerating. Fortunately for you in
the natural sciences, your fields of study is
leading many of these changes. But, make no mistake that whatever career path you make there will be massive changes to the way you conduct your
work on a day-to-day basis, And you need to embrace these changes by doing what our species has done better than any
other organism on this planet, you must adapt and change. As Charles Darwin would probably agree, it’s not the strongest or the
most intelligent who succeed, but those who can best manage the disruptive challenges of change. Adaptation is not just about
survival for our species. For all of the students here today it’s a matter of success and progress. In my 40 years of professional work I’ve been fortunate enough to have four different
careers during that period. Most people only have one career. To do this, I had to adapt to change to learn new concepts and practices. It’s not easy starting over,
especially as you get older. But if I hadn’t embraced the changes and the new challenges that came with them I never would have been able to progress from a local
real estate industry here in Fort Collins, to
the global energy sector, where today my small company will enter the ranks next year as the seventh largest
LNG producer in the world, right behind behemoths like Shell, Exxon, and the country of Qatar. Now, I’ll spare you my
life story in business, but I hope I can personally identify a few themes of adaptation
that can I pass on to you with the goal that you, too, can experience personal
and professional success, just as I have. One of the first things that’s necessary for successfully adapting to changes in the life and the business world is that once you’ve done your homework, once you’ve analyzed the road ahead and you’ve decided to chart a new course with a new job or career, you need to realize, you’re going to be the weakest person in your field, and you need to swim and
keep up with the other fish when natural selection will do you in. To that point, when I started in the oil and gas industry I had no prior experience in the field, but I utilized my education, as Jan said, in chemistry and in mathematics
that I learned here at CSU, and I dove into the technical
aspects of the business and I learned it rather quickly. Basically, I adapted my prior
education to my new business. You shouldn’t be afraid
of going into something that is not exactly what
you learned in school. You can use your education
in many different ways to succeed in this rapidly changing world. Now, that all sounds easy
when I say it like that, but in order to
successfully adapt to change you have to know how to
take measured risks in life, be able to analyze opportunities and conceptual ideas for
their inherent value, and for the potential pitfalls. Before venturing into
liquified natural gas, or as we call it, LNG, some 16 years ago, I had
no idea what it even was. So my understanding and
analysis of importing LNG started from a blank slate. For those of you who are
like me when I started in LNG and you’re not familiar what
liquified natural gas is, it’s basically natural gas that’s been supercooled to
minus 260 degrees Fahrenheit, and at 260 degrees Fahrenheit it changes state from a gas to a liquid, just like water does
from a liquid to a solid. And as it changes phase,
it shrinks 600 times. Think of a beach ball going down to the size of a marble. You can fit a hell of a lot
more marbles in a big ship than you can beach
balls. (audience laughs) And that’s how LNG moves from
countries with excess gas to countries that don’t have the gas. We load it on massive tankers that are like huge floating thermoses, as big as the largest
cruise ships in the world, from points around the world like the US Gulf Coast, where Freeport is, and places like Qatar and Australia, and the ships set sale for customers in countries that are
deficient in natural resources like Japan, South Korea, China, and India, and that not only need energy, but they want clean burning natural gas instead of dirty coal or oil. Today LNG is one of the
biggest capital endeavors in the entire energy industry, and it’s leading the fossil fuel industry in reducing CO2 emissions. Now, I had to do extensive research on LNG before I started Freeport LNG. After selling my oil
and gas business in 2001 I was convinced that the US was starting to run out of natural gas, that essentially our gas
reserves were declining too fast to keep up with demand. And despite all of this,
I came to the conclusion that the United States was
going to keep demanding cleaner burning natural gas
for fuel for power generation to reduce our dependence on dirty coal. So at that point I concluded that developing a new LNG import terminal for the United States was
a valuable business plan, and would help provide our country with a secure energy source. The point is, all my convictions were based on studying the data, building a business plan around
sound, analytical research. No matter what you do, establishing a comprehensive business plan based on analytical research is a must for starting any new venture and adapting to changes in your life. In order to be adaptive, you don’t have to be the first person to foresee a change or
conceptualize a new innovation. In other words, conceiving a design for scientific experiment, or
a newly engineered product, is only one of the
ingredients for success. Ideas are, in fact, a dime a dozen. What matters is being able
to execute a good plan at the right time, and do
it in a timely fashion. Freeport LNG was started
because someone else had the idea to build the
first LNG import facility in 20 years in the United
States, but failed. After years of marketing the project, they were close to bankruptcy
when I took it over. It needed more than money, it needed the right team
to execute the right plan to navigate the first import
license in over 25 years, while at the same time getting
customers and financing so we could finance a
billion dollar facility. I combined my energy experience and my prior real estate background to do what no one else had seen. Now, I had mentioned before that we had come to the
conclusion back in 2002 that the United States
needed to import natural gas by means of LNG. However, no one knew at the
time only five years later a disruptive technology
was gonna come along and that would make our plant so that it was no gonna even be used, and I’m talking about
shale gas and shale oil. Fortunately we developed a
business with long term customers and had a successful operation, but it was clear that our terminal was not gonna be utilized for its intended purpose to import LNG. The United States had more gas
than it knew what to do with. The new era of gas was ushered in through hydraulic fracking, and our company needed ways
to adapt to this change. Jan mentioned we’re building
this massive export project. It’s bigger than this entire campus. The idea to export natural gas
from the United States as LNG was actually my competitor’s idea, who also had a large import facility that wasn’t being used. My team and I deliberated,
and we considered this to be an excellent
opportunity for the company. Our prior experience with LNG imports taught us that we needed to
have first mover advantage. We were the second company
to file for export permits, and eventually 25 others followed. We were the second company
to sign long term customers who committed to billions
of dollars of exports which enabled us to secure the financing to construct this 14 billion
dollar export facility. We were the third company to
start construction in 2014, and now we are one year away
from starting production of what will be the third largest LNG export project in the entire world. Out of the 25 plus facilities that applied for federal permit approval, only five succeeded in reaching the goal of beginning construction
before oil prices crashed and before their construction could begin, so there were only five that made it in the first wave of LNG export projects. It was my conviction that
we had a unique opportunity with outstanding economics that would not be there very long if we didn’t move so quickly. It was one thing to have
a great idea for business, it’s another thing to talk about it, but the key is to go out
and seize the opportunity before it disappears,
I can’t emphasize more. Great opportunities never
last very long in anything. Never forget that. The LNG industry has been
an exciting passion of mine for the last 16 years. It has taught me what it really means to be an adaptive businessman, one who’s always prepared to
chart a new course in life. As you launch your careers after CSU, I hope you’re all
successful in adapting to, I’m sorry. Screwin’ up the end. (audience laughs) I hope you all success on adapting to the amazing new
advancements we see in society. The changes are happening
faster and faster, so you need to be ready. Embrace these changes, and you can be the next
leader in whatever you choose. Thank you very much. (audience applauds)

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