LNG

Tellurian Inc., the developer of the Driftwood LNG export project in Louisiana, has signed an agreement to sell its Haynesville gas production business in East Texas and Louisiana to Dallas, Texas-based Aethon Energy Management, a private investment firm.

Tellurian said Aethon had agreed to pay $260 million for the shale gas business and additionally signed an accord to purchase 2 million tonnes per annum of LNG from the Driftwood liquefaction plant.

“The assets will expand Aethon’s footprint in the Louisiana Haynesville and Bossier shale basins with approximately 31,000 net acres, including gathering and treating systems that have capacity for up to 100 million cubic feet per day that will bring Aethon’s pro forma gathering and treating capacity to over 3 Bcf per day across its assets,” said a statement.

Lazards role

Tellurian earlier in 2024 hired the investment bank Lazards to explore a sale of its Haynesville gas production business as part of efforts to raise new capital to continue the Driftwood project with full permits to produce 27.6 million tonnes per annum.

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

According to the regulatory permits and building schedules 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.

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

The Tellurian-Aethon Heads of Agreement contemplates the parties negotiating a 20-year offtake agreement which would be indexed to Henry Hub plus a liquefaction fee, with appropriate credit support, to provide the basis for project financing of Driftwood LNG.

The Tellurian-Aethon transaction is expected to close during the second quarter of 2024 and Tellurian will use the proceeds to reduce borrowings and for general corporate purposes.

Project boost

“Agreements with Aethon take us several steps closer to developing the Driftwood LNG project, for which Aethon is a vital partner,” said Tellurian Executive Chairman Martin Houston.

“The offtake agreement for 2 MTPA provides the foundation to accelerate Driftwood and demonstrates that we have successfully aligned our commercial offerings to meet the needs of potential customers,” Houston explained.

“For Tellurian, the proceeds from the sale of our upstream assets allow us to retire senior secured notes and strengthen our balance sheet for the long term,” stated Houston.

The Aethon firm’s Chief Executive for energy funds, Albert Huddleston, said that the expanding scale of its integrated business continues to deliver capital efficiency and industry-leading margins as the firm work to accelerate the role of natural gas in the broader energy transition.

“This Fund II and Fund III acquisition provides complementary growth opportunities alongside our extensive upstream and midstream footprint in the Haynesville with more than 20 years of existing inventory life,” added Huddleston.

Lazard served as financial advisor to Tellurian in this transaction, and Akin Gump served as legal counsel. Gibson Dunn provided legal counsel for Aethon. 

EQT Corp., the leading US natural gas producer in the Appalachia Shale Basin, reported second-quarter losses due to falls in output and prices, though advanced its direct liquefied natural gas prospects by signing a heads of agreement for tolling at the Lake Charles LNG export project in Louisiana for 1 million tonnes per annum.

Centrica plc, the UK owner of the British Gas utility business and a liquefied natural gas importer, has signed a long-term LNG supply agreement with US export plant developer Delfin Midstream Inc.

China Gas Holdings, one of the leading non-state controlled companies in the Chinese city-gas and LNG sectors, said one of its subsidiaries signed a US LNG supply agreement with Venture Global for cargoes from Louisiana.

The Chinese company said its trading unit China Gas Hongda Energy Trading Co. signed two 20-year LNG Sales and Purchase Agreements (SPAs) for free-on-board (FOB) cargoes.

Under the deals, China Gas will buy 1 million tonnes per annum (MTPA) of LNG from the Plaquemines LNG project and another 1 MTPA from the CP2 LNG export facility to be constructed near Venture Global’s existing Calcasieu Pass export plant.

China Gas is involved in more than 600 projects in cities and towns with city-gas pipeline concessions, 17 natural gas pipeline transmission projects and operates over 550 LNG and compressed natural gas filling stations for vehicles.

“As a major participant in China’s energy market, we are committed to providing reliable and low-carbon LNG to Chinese customers,” said Liu Minghui, Chairman and President of China Gas.

Strengthens portfolio

“These two SPAs increase additional volumes for our LNG portfolio and strengthen China Gas’s supply ability,” stated Liu.

Michael Sabel, Chief Executive of Arlington, Virginia-based Venture Global said he was pleased to have the Chinese firm as a customer.

“Through relentless execution and innovation, our company will continue to bring much needed new capacity to the global LNG market, supporting energy security and environmental progress both in Asia and Europe,” declared Sabel.

China Gas has many subsidiaries and one of them was behind one the worst gas pipeline accidents in China in recent years and China Gas took full responsibility.

The explosion occurred in an area in Shiyan City in the northeast province of Hubei Province on the 13th of June 2021 and killed 25 people and left 27 others with serious injuries.

The pipeline system in Shiyan was the responsibility of one of the subsidiaries of China gas, Shiyan Dongfeng Zhongran City Gas Development Co.

However, China Gas accepted the blame and pledged to improve safety standards in the gas industry after an investigation by the provincial government exposed serious safety flaws.

The accident occurred when leaked natural gas from a pipeline gathered in the confined space underneath buildings and caused an explosion when coming into contact with sparks in fumes from nearby catering outlets.

The investigation into the incident exposed problems in the Chinese gas sector exacerbated by illegal construction, long-term failure to investigate gas leaks, chaotic property management and inefficient emergency responses to major incidents.

Commonwealth LNG, the export venture proposed for Cameron Parish in the US Gulf Coast state of Louisiana, has been informed by the Federal Energy Regulatory Commission of the launch of an environmental impact statement (EIS) process with firm deadlines.

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.

Glenfarne Group, the owner of the Magnolia LNG export project in Louisiana, has been granted five more years by the Federal Energy Regulatory Commission to complete the Louisiana plant and associated facilities.