LNG

Global natural gas and LNG markets have been given further considerations to add to the mix of North Asian spot cargo prices and European gas values as the NYMEX Henry Hub jumped to $8.80 per million British thermal units on perceived very high future LNG demand from Germany to Guangdong.

Demand for liquefied natural gas increased and the number of cargo liftings rose even as the price of Asian spot shipments jumped to over $23 and European values stayed high after a week of records amid very tight supply for the end of the Northern Hemisphere summer season.

North Sea Brent crude oil prices dropped under $40 per barrel after previously staying in the $41-$45 a barrel range for the previous two months, while spot LNG and natural gas prices declined on demand concerns related to the slowing economic recovery in China and Europe.

Tellurian Inc., the developer of the proposed Driftwood LNG export plant in Louisiana, is making new pitches to investors and buyers as it pointed to a likely surge in demand in China and India as well as nations in Southeast Asia as it pledged to have feed-gas at a price lower than the Henry Hub.

In its latest report filed with the US Securities Exchange Commission, Tellurian forecasts that 100 million tonnes per annum of additional construction is needed because of LNG capacity constraints by 2021 as demand increases.

Analysts said the company may be keen to still bring India’s Petronet LNG on board or other potential investor-buyers from Asia or elsewhere.

“Haynesville shale gas production of 46 million cubic feet per day from current assets of 1.2 trillion cubic feet will enable Driftwood to supply LNG at a free-on-board (FOB) price of $3.50 million tonnes per annum,” said Tellurian in its presentation

“Haynesville gas can be supplied at a lower cost than Henry Hub at $2.00 per MMBtu and delivered to the plant regardless of Henry Hub market index prices,” said Tellurian.

“The company’s model for investors ensures interest alignment for joint venture partners who own their share of the LNG at a cost of $3.50 per MMBtu, comprising $2.00 per MMBtu for gas delivery, $0.75 of operating expenses and $0.75 for debt service,” explained the Houston-based company listed on the Nasdaq global exchange.

Tellurian stated that its integrated model would help avoid the effects of price volatility.

“Driftwood LNG will come at a lower cost and will have less price volatility than other LNG price indexes,” the company noted.

Tellurian’s Driftwood facility would provide more than 27 MTPA of supply to meet new demand, particularly in China and India.

“China and India LNG demand is resilient and imports were up 8 percent and 21 percent respectively through July 2020 on a year-on-year basis,” said Tellurian.

The company stated that new Asian markets will also see demand growth of around 41 MTPA by 2025 and these emerging markets could add the equivalent of another South Korean market in the next four years.

Bangladesh, Malaysia, Pakistan and Thailand are facing domestic gas demand increases because of the need for power amid declining indigenous gas production and strong economic growth prospects.

The Philippines, Taiwan, Vietnam and Indonesia so far have only 17 percent gas market penetration and with growing gas demand for power, especially as coal and nuclear options fall out of favour.

Tellurian additionally expressed its confidence in engineering, procurement and construction contractor Bechtel Inc. of the US, which had also invested $50M in the project.

The company said its fully-wrapped EPC contract had already seen 30 percent of engineering completed and the project was shovel-ready.

The presentation stated that the Driftwood project would be brought to fruition by an experienced team, several of whom helped develop Cheniere Energy’s Sabine Pass LNG export plant, the largest in the US.

The executives listed are Executive Chairman and co-founder of Tellurian Charif Souki, who launched Cheniere in 1996 and Meg Gentle, the current President and Chief Executive of Tellurian.

They will be aided by former UK BG Group head of LNG, Martin Houston, who is also a co-founder and Vice Chairman of Tellurian.

Another key member of the management team is named as Keith Teague, Chief Operating Office and another recruit from Cheniere.