LNG

Kinder Morgan Inc. (KMI), the leading US pipeline feed-gas company for liquefied natural gas plants and a key energy infrastructure operator and developer, reported solid earnings and revenues for the fourth quarter and full year as pipeline projects and expansions advanced.

Tellurian Inc., the developer of a Gulf Coast plant in Louisiana with an associated pipeline and offering partners cargoes at $3.50 per million British thermal units, said the Asian market was rebounding as its own third-quarter losses narrowed.

Tellurian’s third-quarter net loss narrowed to $29.46 million from $39.60M in the same three months of 2019.

However, nine-month losses widened to $119.04M compared with $114.22M in the same period last year.

Tellurian said the value of its assets had dropped to $293 million at the end of September 2020 from $382.32M at the end of 2019.

Tellurian is developing a portfolio of natural gas production, LNG trading, and infrastructure that includes the Driftwood LNG export plant near Lake Charles with around 27 million tonnes per annum of output.

The company, listed on the Nasdaq global exchange, was upbeat about the recovery of the LNG global market.

“China and India LNG imports up 10 percent and 15 percent respectively through October year-on-year and the Japan-Korea-Marker prices proves the market rebound, with LNG imports back above 2019 levels in September-October,” said Tellurian in its November presentation to accompany the earnings statement .

The Houston, Texas-based company currently has Haynesville shale gas assets of 1.2 trillion cubic feet of resources and 46 million cubic feet per day of output.

Tellurian explained in the briefing that it holds 10,067 net acres in the Haynesville Shale.

Tellurian is planning a Driftwood gas pipeline project from the community of Gillis in northern Calcasieu Parish in Louisiana to the liquefaction plant on the coast.

There the company’s joint venture partners would be able to load free-on-board (FOB) LNG cargoes at an average price of $3.50 per MMBtu.

“Driftwood LNG is shovel ready, all permits secured and engineering is 30 percent complete, while $150M has been invested in the engineering, procurement and construction first phase,” the company explained. The EPC work will be carried out by leading global LNG plant builder Bechtel Inc..

Tellurian said its total third-quarter revenues from natural gas sales and LNG trading increased to $14.26M from $9.34M in the same three months of 2019.

Nine-month sales to the end of September amounted to $28.81M versus $19.63M in the prior-year period.

Tellurian said its natural gas production for the third quarter was around 4.1 billion cubic feet equivalent and remained flat, with an exit rate of 47 million cubic feet equivalent per day.

“Natural gas markets and prices have recovered worldwide,” said President and Chief Executive Meg Gentle in her earnings statement.

“Investment in new drilling and infrastructure is acutely needed to balance the market in 2021 and beyond,” she explained.

“Building liquefaction terminals as fully integrated partnerships is the only way partners will secure the lowest cost of gas and be protected from the market’s inherent volatility,” Gentle stated.

Tellurian ended its third quarter with around $77.9M in cash and cash equivalents and about $80.8M in current borrowings.

The US Golden Pass LNG export project on the Gulf Coast, owned by Qatar Petroleum and ExxonMobil, is requesting authorization from the Federal Energy Regulatory Commission to begin the work covered in the latest part of its Implementation Plan and including the foundations of the first liquefaction Train by mid-October 2020.

The FERC formally approved the transformation of the Golden Pass import terminal located on the Sabine-Neches Waterway in Texas into an export plant in December 2016.

The Qatar-ExxonMobil project is building three liquefaction Trains with around 16 million tonnes per annum of output.

The first Train is still scheduled to come on stream in 2024, with Train 2 expected to follow six-to-eight months later, and Train 3 six-to-eight months after that.

Golden Pass has continued to progress its site development activities since 2019 and has now submitted the next chapter of the Implementation Plan to expand work at the site.

The project’s engineering, procurement and construction contractor is a joint venture comprising Chiyoda Corp. of Japan and US companies McDermott International and Zachry Group.

The EPC companies have been making sure that local businesses received priority consideration for work and has awarded 34 local sub-contracts since actual construction began in May 2020.

The part of the Implementation Plan referred to in the latest FERC filing includes the installation of the foundations in the LNG Train 1 Area.

“While Southeast Texas perseveres through the Covid-19 crisis, many companies and residents are getting a boost from opportunity brought to the area by the Golden Pass LNG export project,” the developers have said.

The EPC contractors said they had already committed over $245 million to local businesses so far, and more than 650 local residents were working on the construction site as of the start of August 2020.

The companies noted that the schedule for the Golden Pass Project remains the same as the schedule that was provided in the Implementation Plan.

Part of the latest information exchange with the FERC covered the foundation calculations for the steel piperack (Pipe Bridge) in Train 1

“Golden Pass shall file with the Secretary the following information, stamped and sealed by the professional engineer-of-record in the state of Texas: a. site preparation drawings and specifications; b. LNG liquefaction facility structures and foundation design drawings and calculations (including prefabricated and field constructed structures); c. seismic specifications for procured equipment; and d. quality control procedures to be used for civil-structural design and construction,” it explained to the FERC.

Golden Pass requested that the information in this part of the plan (Volume II) be treated as “privileged and confidential”, and that it not be released to the public.

“This information contains proprietary information that is customarily treated as privileged and confidential and disclosure of this information could result in commercial and competitive harm to Golden Pass,” the developers told the FERC.

Qatar Petroleum owns 70 percent of the project and 30 percent is held by ExxonMobil.

The US major is also Qatar’s main partner in the existing Trains in Qatar itself which produce 77 MTPA and will be expanded to 110 MTPA.

ExxonMobil has said that the Golden Pass project is building on the other successful international relationship between the two in exploration and development activities in nations such as Argentina, Brazil and Mozambique.

Tellurian Inc., developer of the Driftwood LNG in Louisiana, said it was preparing a write-down of resource asset values and project cost cuts as well as a share offering, as its marketing arm sold an LNG cargo amid attempts to bring Indian company Petronet on board as a buyer and an investor.

“Tellurian continues to evaluate, and discuss with potential partners, the scope and other aspects of the Driftwood project in light of the evolving economic environment, investor needs and other factors,” said the company in a statement to the Nasdaq global stock exchange.

“As a result of these discussions, the company is evaluating certain potential changes to the project that, among other things, could significantly reduce the overall cost of Phase 1,” it explained.

“Whether the company implements changes to the project will be based on a variety of factors, including the results of continuing analysis, changing business conditions and investor feedback,” it added.

The Driftwood export facility is proposed for the west bank of the Calcasieu River, south of Lake Charles, and with output of 26 million tonnes per annum.

Tellurian said that to date about 30 percent of the engineering for Phase 1 of the Driftwood LNG terminal has been completed by US engineering, procurement and construction company Bechtel.

The statement to Nasdaq acknowledged that although Tellurian had not completed its financial statement for the second quarter of 2020, its capital resources amounted to about $88.3 million of cash and cash equivalents, of which approximately $40.1M was maintained at a wholly owned subsidiary of Tellurian Production Holdings.

“Subsequently, in early July, the company collected a receivable of approximately $7M from the sale of an LNG cargo to an unrelated third party,” Tellurian explained.

“As disclosed in the company’s proxy statement for the 2020 annual stockholders’ meeting, the company has agreed to reimburse one of its directors for certain expenses associated with a lawsuit with Cheniere Energy,” it said.

“In addition to amounts paid as of June 30, 2020, the company expects to incur related expenses of approximately $4.5M,” it added.

Declines in natural gas prices are also likely to lead to Tellurian incurring “substantial impairment charges” relating to its reserves and the carrying value of its assets.

From its acquisition in 2017 of Rockcliff Energy, Telllurian’s assets include about 3.3 million cubic feet per day of natural gas production, 1.4 trillion cubic feet gas resource.

In total, Tellurian holds 10,300 net acres in the prolific Haynesville Shale gas basin in Louisiana, located north of the proposed liquefaction plant, and with 22 company-operated wells and 32 non-operated wells.

Tellurian additionally announced it had entered into a securities purchase agreement with certain institutional investors for the sale of 35 million common shares at a price of $1.00 per share for total gross proceeds of $35M.

“The offering will generate net cash proceeds of approximately $32.5 million after deducting estimated expenses in connection with the offering,” said Tellurian.

“The registered direct offering is expected to close on or about July 24, subject to the satisfaction of customary closing conditions,” it added.

Roth Capital Partners is acting as the placement agent for the heavily discounted offering.

The latest events saw Tellurian shares drop by almost 20 percent on July 22 to $1.28 per share from $1.58 per share at the previous close.

The Tellurian shares on the Nasdaq had jumped by more than 56 percent on July 21, valuing Tellurian at $422 million from $270M the previous day, July 20, when they were worth $1.10 per share.

This was because of reliable reports that Petronet and Tellurian were again in talks about the Indian company purchasing up to 5 million tonnes of LNG and taking a big equity stake in the company.

Neither Tellurian nor Petronet have commented so far on the reports.

Global Energy Megatrend Ltd., the new owner of the US Magnolia LNG export project, counts among its six named directors, Lord Peter Lilley, a former UK Conservative government minister under Margaret Thatcher and John Major.

Energy Transfer, the US pipeline owner and shareholder with Royal Dutch Shell in the Lake Charles liquefied natural gas export project, reported solid fourth-quarter results as the LNG venture makes more progress.

The Dallas, Texas-based company said fourth-quarter net income attributable to partners amounted to $1.01 billion, primarily due to higher operating income.

It reported adjusted gross earnings of $2.81 billion, up 5 percent from the fourth quarter of 2018.

Energy Transfer said that among the quarterly highlights was the announcement in December 2019 with Shell US LNG of a comprehensive commercial tender package for engineering, procurement and construction contractors to submit final commercial bids.

“The proposed Lake Charles LNG liquefaction project being jointly developed by Energy Transfer and Shell on a 50-50 basis would modify Energy Transfer’s existing LNG import facility in Lake Charles, Louisiana to add LNG liquefaction capacity of 16.45 million tonnes per annum for export to global markets,” the company explained.

Energy Transfer also noted that in October 2019 that the Permian Express pipeline expansion went into full service.

The Lake Charles facility was the longest-serving US import terminal before the shale-gas boom and previously imported cargoes from Trinidad and Equatorial Guinea.

Under the transformation, Lake Charles will become an export facility and the successful EPC bidder is expected to be chosen after the second quarter of 2020.

The commercial tender focused on the technical scope of the project, specifically verifications of the engineering and design of the liquefaction facility.

Energy Transfer sees the Lake Charles project would capitalizes on “repurposing” the existing brownfield regas assets to achieve cost savings in the construction of the liquefaction facility.

It added that the project would also benefit from the unique strength of Energy Transfer as a leading natural gas pipeline operator with extensive connectivity to the Lake Charles facility.

Energy Transfer and Shell have signed a framework agreement designating Shell as the project leader and as construction manager and operator of Lake Charles LNG.

The Federal Energy Regulatory Commission has authorized a deadline for the Lake Charles plant to be completed by mid-December 2025.

Shell gained its stake in the Lake Charles facility from its takeover in 2015 of BG Group of the UK.

Energy Transfer began in 1995 as a small intra-state natural gas pipeline operator and is now one of the largest energy infrastructure firms in the US.

Lake Charles would be Shell's largest liquefaction foothold in North America, rivalling its LNG Canada joint venture in the province of British Columbia.

The Commonwealth LNG project in the US, a liquefaction and exports plant proposed for the west side of the Calcasieu Ship Channel near Johnson Bayou in Louisiana and holding a supply deal with international commodities firm Gunvor, has received its environmental impact report schedule from regulators.

US engineering company KBR reported an increase in second-quarter revenues as the energy project backlog surged ahead, led by the contract award for Train 4 at the Freeport LNG export plant on Quintana Island in Texas.

US Federal Energy Regulatory Commission Chairman Neil Chatterjee said the agency is creating a new division in its Office of Energy Projects to accommodate the growing number and complexity of applications to site, build and operate LNG export plants.

Venture Global, the US LNG project developer with two export plants proposed for Louisiana, has held discussions with the Federal Energy Regulatory Commission on the filing requirements for the construction of a third plant in the Gulf Coast state called Delta LNG.