LNG

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 Department of Energy extended the terms of seven long-term liquefied natural gas export authorizations through 2050 to help preserve what it said was a vital energy source for its friends and allies.

The actions follow 10 LNG export term extensions previously issued in October pursuant to an export term policy statement finalized in July 2020 by the DoE.

“The success story of US LNG continues to be written, and these extended authorizations will ensure that the benefits from these exports continue for decades to come,” said US Secretary of Energy Dan Brouillette.

“The United States just set a new all-time high record for LNG exports in November 2020, and the monthly rate of LNG exports has now quintupled since the beginning of the Trump Administration,” added Brouillette

The term extensions issued include for the Golden Pass project owned by Qatar Petroleum and ExxonMobil whereby the terminal is currently being transformed into an export plant.

Other projects under development and on the extension list to 2050 are Texas LNG, proposed for Brownsville, Texas, as well as Magnolia LNG in Louisiana.

The Magnolia plant is proposed for a 115-acre site near the Calcasieu Ship Channel. It is designed to produce 8.8 million tonnes per annum of LNG from four Trains.

Both Texas LNG and Magnolia are controlled by Glenfarne, a New York-based fund specialising in energy infrastructure investment.

Tellurian Inc.’s Driftwood venture at Lake Charles in Louisiana and the Delfin LNG project, proposed for offshore Louisiana, are on the list as well.

The Delfin FLNG project is based on the deployment of floating liquefaction facilities with other moored production and storage vessels.

The Delfin developers have already been awarded a deepwater port licence by the US Maritime Administration and the venture has been approved by the US Coast Guard.

Delfin then asked the Federal Energy Regulatory Commission for a three-year and six-month extension until 28th March, 2023 to build facilities to connect up to the FLNG units 30 miles off the coast.

Sempra Energy, the owner of the Cameron LNG plant in Louisiana, also sees and extension linked to its Costa Azul project on the Pacific Coast of Mexico.

Costa Azul, which recently reached a final investment decision for its mid-scale project, has DoE authorization to import and liquefy US-sourced natural gas for export from Mexico.

“Critical to our Nation’s energy independence are the prospects presented by these long-term LNG export extensions,” said Deputy Secretary of Energy Mark W. Menezes.

“LNG is and will continue to be a vital energy resource for our friends and allies around the world,” added Menezes.

These issuances extend each project’s long-term LNG export authorization to non-free trade agreement (non-FTA) countries through December 31, 2050.

Acting Under Secretary of Energy and Assistant Secretary of Fossil Energy Steven Winberg said the move was necessary.

“It is important for DOE to do everything to assure a long-term future for US LNG exports, which will continue to meet global energy security and emissions reduction goals,” added Winberg.

Including the term extension applications just granted, long-term LNG export authorizations with export terms through 2050 are now held by 13 US LNG export projects, as well as the Costa Azul project in Mexico.