LNG

Sempra, the US utility whose LNG unit Sempra Infrastructure owns Cameron LNG in Louisiana and other projects in Mexico, has taken a positive final investment decision to build the Port Arthur liquefaction and export plant in Texas.

US energy company Sempra, operator of the Cameron LNG export plant in Louisiana, has signed an amended engineering, procurement and construction (EPC) contract with engineering firm Bechtel Energy for the Port Arthur LNG export project in Texas.

Bechtel and the Sempra unit, Sempra Infrastructure, have amended the EPC contract for the proposed Phase 1 liquefaction project in Jefferson County in Texas to a new price of approximately $10.5 billion.

“The execution of the final contract is a critical step in advancing Phase 1 of Port Arthur LNG toward a final investment decision,” said Justin Bird, Chief Executive of the Sempra Infrastructure unit.

“Based on robust customer interest, we know that Port Arthur LNG is highly attractive to the global market and we look forward to providing customers with access to secure, abundant and reliable US LNG,” added Bird.

Paul Marsden, President of Bechtel, said the firm was delighted to continue its partnership with Sempra after constructing the Cameron export plant at Hackberry.

“Alongside Sempra Infrastructure, Bechtel is ready to continue active construction in the Gulf Coast and bring more opportunities to the local region” added Marsden.

Contract scope

The Sempra EPC contract with Bechtel covers engineering, procurement, construction, commissioning, start-up, performance testing and operator training activities for Phase 1 of the new Texas plant.

The Port Arthur Phase 1 project has all its permits and is expected to include an initial two liquefaction Trains with a combined 13.5 million tonnes per annum of output.

Sempra said it was already working on a similarly-sized Port Arthur LNG Phase 2 project with “active marketing” taking place. This would take total production eventually to 27 MTPA.

California-based Sempra has signed a series of supply deals for Port Arthur Phase 1 involving four companies.

They are the Polish Oil & Gas Company, the German utility RWE Supply & Trading, UK chemicals company INEOS and US major ConocoPhillips.

The Sempra Infrastructure unit of Sempra also contains the other LNG assets like the Cameron plant and the Costa Azul export project in Mexico.

Earlier in 2022 Sempra agreed to sell a 10 percent interest in Sempra Infrastructure Partners to a subsidiary of the Abu Dhabi Investment Authority (ADIA), the wealth fund in the United Arab Emirates, for $1.78Bln in cash.

The San Diego-based utility business of Sempra includes San Diego Gas & Electric Co. and Southern California Gas Co. 

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.

The US Mexico-Pacific Ltd (MPL) LNG project company based in Houston has joined with LNG engineering firm Bechtel Inc. on developing a Mexican liquefaction and export facility on the Pacific Coast using US natural gas as the feed gas and processing technology from ConocoPhillips.

Tellurian Inc., the owner of the Driftwood LNG export plant in Louisiana that has sealed supply deals with commodities trading firms Gunvor and Vitol, is transferring the listing of its own shares from the Nasdaq to the NYSE American, formerly known as the American Stock Exchange (AMEX) and now the third-tier exchange for US investors.

“Transferring our stock listing to the NYSE American allows us to leverage the exchange’s prestigious trading platform for our shareholders’ benefit,” said Tellurian Executive Chairman Charif Souki.

Tellurian said it expected its common stock to begin trading on the NYSE American on November 2, 2021 and will remain under the current ticker symbol “TELL”.

Trading of Tellurian shares on Nasdaq was expected to end at close of business on November 1, 2021.

The Houston, Texas-based company is moving towards the LNG plant construction phase after signing the Gunvor and Vitol LNG sales agreements in late May and early June 2021 for a combined 6 million tonnes per annum of cargoes from the Driftwood facility.

Each of the agreements is for a period of 10 years with the supply indexed to a combination of the Japan-Korea Marker for Asian spot cargoes and the European benchmark Dutch Title Transfer facility (TTF) price.

The engineering, procurement and construction contract has already been agreed with Bechtel Inc., the leading global builder of LNG export facilities.

The Driftwood plant with production capacity of around 27 MTPA and will be built on the west bank of the Calcasieu River, just south of Lake Charles.

Reasoning

In announcing the switch from Nasdaq to the NYSE American, Tellurian Chairman Souki said it comes at a time of “global natural gas shortages” and recent “history-making” prices

“This indicates the pressing need for additional liquefaction export capacity in the United States,” added Souki.

“Tellurian is poised to contribute to America’s status as an energy superpower, having achieved both regulatory permits and commercial success for Driftwood LNG phase one development,” he explained.

“We have turned our focus to putting together a world-class banking group and have started site preparation, in advance of giving our partner Bechtel notice to proceed with construction expected in the first quarter 2022,” stated Souki.

The Nasdaq and the NYSE American have different stock trading profiles.

Nasdaq (the National Association of Securities Dealers Automated Quotations) holds a higher trading volume per day than any other stock exchange in the world.

Nasdaq joined forces with AMEX in 1998 to create the Nasdaq-Amex Market Group. However, the merger was short-lived and the AMEX regained its independence in 2004.

Now called the NYSE American, the exchange includes the second-largest options trading market, though is now mainly regarded as a platform for small-cap and mid-cap stocks and derivatives.

“We’re excited to welcome Tellurian as it transfers to NYSE American and joins our community of innovators and disruptors,” said John Tuttle, Vice Chairman and Chief Commercial Officer of the NYSE Group.

“We look forward to working with Tellurian as it supplies the world with a reliable, clean energy supply,” added Tuttle.

Tellurian Inc., developer of the Driftwood LNG export plant with volumes taken by leading commodities firms Gunvor and Vitol, will soon sign a long-term lease near Lake Charles in Louisiana so it can begin preparing the site for full construction.

Tellurian executive Chairman Charif Souki explained the latest plans in a message to investors.

The Houston, Texas-based company is moving ahead after signing firm deals in late May and early June 2021 with commodity trading firms Gunvor and Vitol for a combined 6 million tonnes per annum of cargoes from the Driftwood plant.

Each of the firm agreements is for a period of 10 years with the supply indexed to a combination of the Japan-Korea Marker for Asian spot cargoes and the European benchmark Dutch Title Transfer facility (TTF) price.

The engineering, procurement and construction contract has already been agreed with Bechtel Inc., the leading global builder of LNG export facilities.

The Driftwood plant with production capacity of around 27 MTPA will be built on the west bank of the Calcasieu River, just south of Lake Charles.

Tellurian has also filed a formal application with the US Federal Energy Regulatory Commission to build a new 37-mile pipeline in Louisiana that will originate near Ragley in Beauregard Parish and end near Carlyss in Calcasieu Parish, near where the Driftwood facility will be located.

Tellurian had prevously planned to build four pipelines connecting supplies in the US Gulf Coast region, before deferring three of them because of commercial challenges.

“Look for that lease to be signed, effected and announced so that we can start the work that we need to do this summer. The activities will be taking place this summer,” stated Souki.

The company has noted that to get the Driftwood LNG plant site ready for full construction, a state highway needs to be widened to accommodate traffic for 5,000 workers, while a pipeline currently crosses the plant site and needs to be relocated.

“The new pipeline has been designed and routed to connect the supply located 21 miles north of Lake Charles to the demand located within and south of Lake Charles, bypassing what has become a constrained, complex and expensive transportation pathway,” said Tellurian after making its FERC filing.

As part of the design, the Driftwood Pipeline is proposing to deploy Baker Hughes-supplied electric-driven compression, thereby reducing the pipeline’s carbon-dioxide emissions.

“This new and completed pipeline design provides definitive and measurable results for emissions reduction and is another step in Tellurian’s overall strategy to support and balance the world’s energy needs,” said Tellurian President and Chief Executive Octávio Simões.

“Our latest commercial agreements have included provisions for tracking and documentation of LNG cargo emissions. Tellurian will continue to explore ways to collaborate with the US Administration and contribute to its plan for a cleaner climate with a focus on upending energy poverty domestically and abroad,” stated Simões.