LNG

Tellurian Inc. has signed an accord to sell the site of the proposed Driftwood liquefied natural gas plant in Lake Charles in Louisiana to a New York-based institutional investor.

Tellurian said in a stock exchange filing that the sale and lease back deal has been the subject of a binding letter of intent for the 800 acres of land owned by Tellurian’s subsidiary, Driftwood LNG LLC.

The agreement with the unnamed investment firm with $120 billion in assets under management will see Tellurian receiving $1 billion for the land and a lease.

“It will consist of the sale by Driftwood LNG and purchase by a special purpose entity to be formed by the investor of Driftwood LNG’s interests in the property for $1.0Bln pursuant to a purchase and sale agreement,” said Tellurian.

On the closing of the transaction a 40-year lease of the property from the purchaser to Driftwood LNG will be signed in the form of a master lease.

The terms of the master lease will include, among other requirements, a capitalization rate of 8.75 percent and annual rent escalators of 3.00 percent as well as a requirement that Driftwood LNG posts a letter of credit equal to 12 months of rent.

Guarantors

There is also a requirement that the equity investors in Driftwood LNG become joint and contingent guarantors of the master lease.

“The master lease contingent guarantors are also required to hold an investment grade rating of BBB or higher or attain an equivalent shadow credit rating, or be otherwise acceptable to the purchaser,” noted Tellurian in its filing.

The Houston-based company is quoted on the American list of the New York Stock Exchange.

The accord contemplates that the parties will use “commercially reasonable efforts” to finalize the purchase agreement and master lease on or before July 14, 2023.

“The LOI will terminate on July 14, 2023 if Driftwood LNG fails to identify the contingent guarantors by such date and will terminate on July 31,” it said.

The satisfaction of the closing conditions in the purchase agreement also including Driftwood LNG securing financing commitments for Phase One of the LNG export project.

Leading US LNG engineering company Bechtel Energy has already been given limited notice to proceed with construction of Phase One of the Driftwood liquefaction plant.

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

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.

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.

Tellurian Inc., the US company planning the Driftwood LNG export project at Lake Charles in Louisiana, posted a first-quarter loss as it focused on debt reduction and said market fundamentals may favour the signing soon of supply agreements.

The Houston, Texas-based company said it continued to build its integrated global natural gas business and concentrated on paying down debt.

“Subsequent to the quarter end, Tellurian made a voluntary $17M debt repayment on April 23, 2021, and has now paid off all borrowing obligations,” said the company.

President and Chief Executive Octávio Simões said Tellurian now had a much stronger balance sheet and global customers continue to be “very interested” in the integrated, market-based LNG product offering.

The overall project plan for Tellurian now is for the Driftwood liquefaction plant to have first-phase production of 16 million tonnes per annum, rising to 27 MPTA with expansions.

“Additionally, we are looking forward to expanding our drilling program in 2021, having recently spud a new well in the prolific Haynesville Shale, that we expect to provide valuable revenue,” stated the CEO.

Tellurian produced 3.3 billion cubic feet of natural gas for the quarter in the Haynesville basin in north Louisiana to the end of March compared with 3.9 Bcf for the previous quarter.

Tellurian’s upstream assets include 9,704 net acres and interests in 72 producing wells.

The company said it ended the first quarter of 2021 with around $58.7M of cash and cash equivalents and generated $8.7M in revenues from natural gas sales.

Tellurian added that it still had a strong balance sheet consisting of approximately $270.3M in total assets.

Charif Souki, the Executive Chairman of Tellurian, said in a presentation that the use of the gas-fired power option was growing in Asia and his company hoped to start finalising commercial agreements based on the current “very strong gas market fundamentals” in Asia and Europe.

“There is now a tremendous amount of demand for natural gas on a global basis and it's now demonstrated by the very high prices both in Asia and Europe at $9 per MMBtu in Asia and $8 per MMBtu in Europe,” said Souki.

“You also have to consider that 85 percent of the world is growing their demand for energy at 4 percent a year, while the other 15 percent of the market, the United Sates and Europe, is flat,” he added.

Souki stated that Asian countries only had two choices for electricity, either nuclear power or natural gas.

“You can do nuclear but only if you've done it a long time ago and it’s extremely expensive,” added Souki.

“You can do wind but that will not satisfy all your needs, just to a certain extent,” he said.

Tellurian Inc., the developer of the US Driftwood LNG export plant proposed for Lake Charles in Louisiana, has resumed natural gas drilling in the Haynesville Shale basin in the north of the Gulf Coast state and could acquire more acreage.

Tellurian, the developer of the Driftwood LNG export plant near Lake Charles in Louisiana, is proceeding with its plans that now may include a fourth pipeline as it posted a larger quarterly net loss and gave more details of its costings and partnership plans.

The company said its first-quarter net loss widened to $34.12 million compared with $25.18M in the same three months of 2018.

Revenues was reported as $4.95M versus $6.80M in the same three months a year ago as Tellurian ended its first quarter with around $88.3M of cash and cash equivalents and about $57.3M of debts.

“Tellurian has a strong balance sheet consisting of approximately $384M in assets,” noted the company.

Tellurian estimates that its Driftwood LNG export plant proposed for 1,000-acre in Calcasieu Parish in Louisiana will cost around $28 billion, including construction costs, transaction expenses and contingencies, though excluding interest costs.

It intends to produce 27.6 million tonnes per annum at the Driftwood plant from 2023.

The facility will include up to 20 small-scale liquefaction Trains, three LNG storage tanks and three marine berths.

“We have entered into four lump-sum, turnkey engineering, procurement and construction agreements totaling $15.2Bln with Bechtel Oil, Gas and Chemicals Inc. for construction of the Driftwood terminal,” said the company.

Tellurian included in its quarterly highlights the signing of a heads of agreement with a subsidiary of French major Total for a $500 million equity investment in the project.

The French company also signed up for the right to purchase 1 MTPA of LNG and for a 15-year sales and purchase agreement to acquire an additional 1.5 MTPA at Japan Korea Marker (JKM) prices.

The company additionally furthered the sale of LNG and Driftwood partnership interests by completing preliminary agreements with other potential partners, including Petronet LNG of India.

“Tellurian is now permitted to construct, operate, and export LNG from the Driftwood project and has a fully articulated EPC plan in place with Bechtel,” said Chief Executive Meg Gentle.

“Our primary focus for the next quarter is finalizing the Driftwood partnership financing. Total has committed as the first partner of Driftwood and we expect to execute final agreements with them by mid-June,” added the CEO.

“We remain on schedule to produce LNG in 2023 and generate $8.00 of cash flow per share after ramp up,” stated Gentle.

Tellurian’s proposed pipelines are expected to consist of three projects, the Driftwood pipeline, the Haynesville Global Access Pipeline and the Permian Global Access Pipeline.

“We are also considering the potential development of a fourth pipeline, the Delhi Connector Pipeline, which would run approximately 180 miles from the Perryville-Delhi Hub in northeast Louisiana to Lake Charles,” explained Tellurian.

The Driftwood pipeline will be a 96-mile large diameter pipeline that will interconnect with 14 existing interstate pipelines throughout southwest Louisiana to secure adequate natural gas feedstock.

Tellurian estimates that the construction costs for the Driftwood pipeline will be $2.3Bln before other expenses.

The Haynesville Global Access Pipeline is expected to run for 200 miles from northern to southwest Louisiana.

The Permian Global Access Pipeline is expected to be 625 miles long and to run from West Texas to southwest Louisiana.

Each of these pipelines is expected to have a diameter of 42 inches and be capable of delivering approximately 2 Bcf/d of natural gas.

“We currently estimate that construction costs will be approximately $1.4Bln for the Haynesville Global Access Pipeline and $3.7Bln for the Permian Global Access Pipeline,” added Tellurian.

Tellurian Inc. has received the US Department of Energy long-term authorization for its Driftwood LNG project to export domestically-produced liquefied natural gas from its proposed export facility near Lake Charles to non-free trade agreement countries.

French energy major Total said it doubled its first-quarter liquefied natural gas sales with the start-up of several projects as it put a price tag on its new Arctic LNG stake and signed up for two other key projects elsewhere.

Tellurian Inc. said it welcomed the issuing of the order from the US Federal Energy Regulatory Commission granting authorization for its Driftwood LNG export project to go ahead at Lake Charles in Louisiana.

Tellurian Inc. developer of the Driftwood LNG project in Louisiana backed by companies such as French energy major Total, has launched an open season for its Permian Global Access Pipeline to secure prospective customers.

The Permian Global Access project is a proposed 42-inch diameter inter-state natural gas pipeline originating at the Waha Hub in Pecos County in Texas and terminating at Gillis in Louisiana, north of Lake Charles where the liquefaction plant will be constructed.

The final environmental impact statement was issued by the US Federal Energy Regulatory Commission in January 2019 to develop the Driftwood liquefaction plant to produce around 27.6 million tonnes per annum of LNG.

The pipeline will connect the prolific Permian Basin in Texas to the rapidly growing natural gas market in southwest Louisiana.

“It will cost approximately $3.7 billion to construct and will have the capacity to transport at least two billion cubic feet of natural gas a day,” said Tellurian.

“Construction could begin as early as 2021 and the pipeline is targeted to be in service as early as 2023,” added the company.

Tellurian is also developing a second pipeline venture called the Haynesville Global Access Pipeline at around the same cost.

In addition to spending $7.4Bln on the two pipelines, Tellurian is developing the liquefaction plant near Lake Charles with total investments of around $15.2Bln and the provision of about 15,000 jobs.

“Permian producers have recently paid $9.00 per million British thermal units to move their natural gas away from the wellhead, reflecting the acute need for infrastructure development in the Basin,” said Tellurian Chief Executive and President Meg Gentle.

“By contrast, Southwest Louisiana is a market expected to grow 300 percent in the next five years,” added Gentle.

“The Permian Global Access Pipeline is critical infrastructure that will interconnect stranded Permian gas production with growing markets, reduce flaring and provide a valuable cleaner fuel to reduce urban pollution and carbon globally,” stated the CEO.

The open season was scheduled to begin at noon Central time on April 8 and runs to Friday, May 24.

Tellurian said it would encourage interested parties to contact Joey Mahmoud, President of the Permian Global Access Pipeline project, at the pipeline company website.

The pipeline open season follows recent advances in the LNG project with Total signing two accords to invest more in the development company and to take its supply requirements from the venture to 2.5 MTPA of LNG.

The sales agreement will be for the purchase of free-on-board (FOB) whereby Total supplies the shipping and for a minimum term of 15 years and based on the Platts Japan Korea Marker (JKM) price.

Total’s equity agreement gives the French company an additional 20 million shares of Tellurian common stock for an amount of $200 million, adding to its previous investment.

April 1 (LNGJ) - Tellurian Inc., the developer of the Driftwood LNG plant in Louisiana, said it hired former Sempra Energy executive Octavio M.C. Simoes as Senior Advisor to the Chief Executive Meg Gentle. Simoes recently retired from his role as President and CEO of Sempra LNG.

   “Octavio brings 38 years of impressive energy industry experience to Tellurian’s remarkable infrastructure team,” said Gentle. “At Sempra, he led the company’s LNG and natural gas midstream activities, including development and commercialization of Cameron LNG,” added Gentle.