Tellurian Inc., the developer of the Driftwood plant in Calcasieu Parish in Louisiana, said it would begin construction work in April on its large-scale liquefaction and export plant whether or not a final investment decision has been taken and all project financing is in place.
Executive Chairman Charif Souki outlined his views in a video commentary covering the Phase 1 financing of the venture near Lake Charles with permits to produce 27.6 million tonnes per annum of LNG.
The Driftwood project proposes to construct 20 processing Trains, each with 1.38MTPA of capacity, and built as five blocks of four Trains to reach the maximum planned capacity.
The Phase One development would include the first two of these blocks with 11 MTPA of output and two of three planned 235,000 cubic metres storage tanks and the first of three planned loading berths for LNG carriers.
“We will start construction in April in earnest. We have enough capital, or access to enough capital to make sure we get through the first year of construction,” stated Souki.
“People normally like to talk about FID or things like this, it doesn’t apply here,” added the Chairman.
“The second issue is, have we continued to completely de-risk the project? It’s not completed de-risked. What is really critical is putting the financing together,” he stated.
Bechtel ready
Souki pledged that Bechtel Inc., which has signed lump-sum, fixed-price contracts worth a total of $15.2 billion for engineering, procurement, and construction of Driftwood LNG, would be on the site in April.
Tellurian has 10-year offtake agreements in place totalling 9 MTPA with Shell North America and global commodities firms Vitol and Gunvor.
The Chairman said that he himself urged people to look at the Japan-Korea Marker price for LNG spot cargoes and the US benchmark Henry Hub because ‘they will determine everything” on the financing front.
“Well today, the commercial reason for doing the deal like this is very obvious. It started a year ago when winter prices around the world started becoming very, very high and it continued through recent weeks and is now so critical that President Biden is doing is best to find gas, for in particular for Europe, but also for the rest of the world and that is a major challenge,” said Souki in his commentary.
“We are now in a situation where we have signed non-disclosure agreements with 45 different financial institutions,” explained Souki.
“Should we rush to the process, no, because 45 different financial institutions would have a lot of different criteria and a lot of different things that we would look for in a final financing and it is critical to get it right for the value for the shareholders,” he added.
Proper financing
Souki explained that it was crucial to get the proper financing package in place.
“So we're not going to rush through that process. We are very comfortable starting the construction program without being completely sure that the financing would be put in place,” he added.
“But the board felt comfortable enough that we would get the financing in short order and possibly before we have to start construction but we will not rush that process. We will make sure that we get the right financing put in place,” continued Souki.
As regards the final financing Souki said he was looking for “two pieces of paper” and one would be a normal bank debt that is “kind of run of the mill” and he had a number of banks in place for this.
He added that he was also dealing with most of the large private infrastructure equity financing groups to have an equity-like instrument that will come in on top of the bank debt to finish building the financing.
