LNG

Tellurian Inc., the developer of the Driftwood liquefied natural gas export plant near Lake Charles in Louisiana, has moved to agree an amendment to the terms of certain debts after a month of various key decisions.

Tellurian said the amendment was expected to enhance near-term liquidity and provide the company with flexibility to successfully complete the sale of its upstream assets. 

Among other items, the amendment provisions include a reduction in Tellurian’s minimum cash balance requirement and the ability for the company to make its upcoming interest payments in-kind.

“This amendment to our debt agreement is pivotal towards establishing a sustainable capital structure and accelerating our strategic priority, Driftwood LNG,” explained Chief Executive Octávio Simões.

“It also provides us the time and flexibility to complete the sale of our upstream assets in a manner that maximizes value for our shareholders while we maintain our focus on the intensive negotiations associated with the commercialization of Driftwood LNG,” stated Simões.

Capacity

The Driftwood project involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity and built as five blocks of Trains.

The Phase One development would include the first two of these blocks for 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.

Analysts note that it has been a busy February 2024 for Tellurian as it also said it was exploring the sale  of Haynesville Shale basin upstream natural gas assets.

Tellurian has engaged the investment bank Lazards to explore opportunities for the sale of the gas assets.

The Houston, Texas-based company said that it had concluded that there were alternative gas supply strategies available to Tellurian from various basins and its ownership of upstream gas wells was not necessary at this stage of the liquefaction plant’s development.

Tellurian’s natural gas assets include 31,149 net acres, interests in 159 producing wells and over 400 drilling locations in the Haynesville Shale.

On the regulatory front, Tellurian was also told in mid-February that the US Federal Energy Regulatory Commission had issued an extension to its order authorizing the construction of Tellurian’s plant.

Building deadline

As extended, the order requires construction to be completed by April 18, 2029. 

Tellurian applied for the extension back in 2023 to ensure it had enough time to complete the construction of all five LNG Trains for the facility with a nameplate capacity of  27.6 MTPA.

Tellurian’s main contractor for the Driftwood construction is the US engineering company Bechtel Energy.

In September 2023, Tellurian signed an agreement with US LNG-equipment supplier Baker Hughes to secure a delivery schedule for eight LM6000PF+ gas turbines, main refrigerant compressors and control units required for Phase One construction.

Tellurian said the Baker Hughes agreement supported its aim of having the Driftwood venture achieving initial LNG production in four years’ time. 

Tellurian Inc., the developer of the Driftwood LNG export plant near Lake Charles in Louisiana, said in an earnings presentation that it expected about $9.7 billion in cash flow once the full project was on stream as it reported narrowed losses in the third quarter and more revenue from natural gas sales.

Tellurian Inc. has finalized yet another liquefied natural gas sale and purchase agreement with Royal Dutch Shell after two previous sealed deals with global commodities firms Gunvor and Vitol.

The Shell SPAs are on a free-on-board (FOB) basis at Driftwood LNG for a combination of 3 million tonnes per annum for a 10-year period, indexed with two indices, the Japan Korea Marker (JKM) and the Dutch Title Transfer Facility (TTF), each netted back for transportation charges.

The agreements mark the third deal that Tellurian has finalized in 10 weeks, totalling 9 MTPA and nearly all of the capacity of Driftwood LNG’s first two liquefaction Trains.

“Tellurian welcomes Shell to the Driftwood project,” said Tellurian President and Chief Executive Octávio Simões.

“Shell manages one of the largest and most diverse portfolios of LNG in the world,” he added.

Steve Hill, Executive Vice President of Shell Energy said the deal suited the Anglo-Dutch company as LNG demand was expected to nearly double by 2040.

“This deal secures additional competitive volumes for our portfolio by the mid-2020s, enabling us to continue providing diverse and flexible LNG supply to our customers. We look forward to working with Tellurian,” stated Hill.

The Houston, Texas-based company is moving ahead after signing firm deals in late May and early June 2021 with Gunvor and Vitol for a combined 6 MTPA from the Driftwood plant.

Each of the firm agreements is also for a period of 10 years with the supply indexed to the JKM and Dutch TTF.

Simões said that Tellurian would now focus on financing Driftwood to give US engineering contractor Bechtel notice to proceed with construction in early 2022.

The Driftwood project has permits for production capacity of around 27 MTPA. The plant will be sited 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, close to where the Driftwood facility will be located.

Tellurian Inc. has delayed as expected its scheduled start of construction of the proposed Driftwood LNG export plant on the west bank of the Calcasieu River, south of Lake Charles in Louisiana, until 2021 and will study the economics of its Permian Basin feed-gas pipeline.

French energy major Total and Tellurian Inc. of the US have signed definitive agreements for $500 million of investments in the US Driftwood LNG export plant and for two Total subsidiaries to buy a total of 2.5 million tonnes per annum of LNG.