LNG

Tellurian Inc., the developer of the Driftwood liquefied natural gas export plant near Lake Charles in Louisiana, has moved to agree an amendment to the terms of certain debts after a month of various key decisions.

Tellurian said the amendment was expected to enhance near-term liquidity and provide the company with flexibility to successfully complete the sale of its upstream assets. 

Among other items, the amendment provisions include a reduction in Tellurian’s minimum cash balance requirement and the ability for the company to make its upcoming interest payments in-kind.

“This amendment to our debt agreement is pivotal towards establishing a sustainable capital structure and accelerating our strategic priority, Driftwood LNG,” explained Chief Executive Octávio Simões.

“It also provides us the time and flexibility to complete the sale of our upstream assets in a manner that maximizes value for our shareholders while we maintain our focus on the intensive negotiations associated with the commercialization of Driftwood LNG,” stated Simões.

Capacity

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

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.

Analysts note that it has been a busy February 2024 for Tellurian as it also said it was exploring the sale  of Haynesville Shale basin upstream natural gas assets.

Tellurian has engaged the investment bank Lazards to explore opportunities for the sale of the gas assets.

The Houston, Texas-based company said that it had concluded that there were alternative gas supply strategies available to Tellurian from various basins and its ownership of upstream gas wells was not necessary at this stage of the liquefaction plant’s development.

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

On the regulatory front, Tellurian was also told in mid-February that the US Federal Energy Regulatory Commission had issued an extension to its order authorizing the construction of Tellurian’s plant.

Building deadline

As extended, the order requires construction to be completed by April 18, 2029. 

Tellurian applied for the extension back in 2023 to ensure it had enough time to complete the construction of all five LNG Trains for the facility with a nameplate capacity of  27.6 MTPA.

Tellurian’s main contractor for the Driftwood construction is the US engineering company Bechtel Energy.

In September 2023, Tellurian signed an agreement with US LNG-equipment supplier Baker Hughes to secure a delivery schedule for eight LM6000PF+ gas turbines, main refrigerant compressors and control units required for Phase One construction.

Tellurian said the Baker Hughes agreement supported its aim of having the Driftwood venture achieving initial LNG production in four years’ time. 

Texas LNG, the liquefied natural gas export project to be constructed by the New York-based Glenfarne Group, has selected Gulf LNG Tugs of Texas to assist LNG carriers arriving and departing from the fully permitted facility at the Port of Brownsville.

Texas LNG, the liquefied natural gas export plant to be constructed by New York-based Glenfarne Group in the Port of Brownsville, has received its last regulatory clearances opening the way for a final investment decision.

The US finished 2023 at the top of the liquefied natural gas exports league as shipments to Europe were ramped up to replace Russian volumes while Australia finished second because of maintenance, strikes and regulatory obstructions for future ventures and Qatar was in third place ahead of its massive expansion plans.

The US Potential Gas Committee (PGC) has released its long-awaited report showing that the world’s No. 1 liquefied natural gas exporting nation has record natural gas resources in the prime basins in terms of recoverable gas and reserves.

Commonwealth LNG, the export venture proposed for Cameron Parish in the US Gulf Coast state of Louisiana, has overhauled its management and named the former Chief Executive of Sempra’s Cameron LNG project, Farhad Ahrabi, to serve as Commonwealth’s new President and CEO.

Ahrabi joins Commonwealth following a seven-year tenure at Cameron during which he oversaw the development, construction and subsequent operations of a 14.5-million tonnes per annum liquefaction and export facility at Hackberry in Louisiana.

Commonwealth’s plan is for an export plant consisting of six liquefaction Trains, each with a nominal production capacity of 1.4 MTPA and totalling 8.4 MTPA.

The project is also proposing to construct six LNG storage tanks, each with capacity of 50,000 cubic metres and one marine berth capable of accommodating vessels of up to 216,000 cubic metres capacity.

The liquefaction plant requires about 182 acres to construct and would occupy about 107 acres during operations.

The Commonwealth project’s founder and Chairman, Paul Varello, said he was delighted to recruit Ahrabi to head the team.

Leadership

“The depth of Farhad’s leadership experience, both at Cameron and the preceding 28 years with BG Group, will be of immeasurable value to our team as we move through the final stages of development and into construction and operation,” said Varello.

“Projects of this magnitude involve a complex convergence of technical, financial, political and community support elements that require the kind of high-level thinking and pragmatic solutions that Farhad can bring,” Varello added.

Ahrabi said he was particularly attracted to the Commonwealth opportunity because of the company’s engineering-focused approach.

The new CEO said that Commonwealth’s advantage is that it will keep liquefaction costs low and ultra-competitive in the global market at a time when there is a growing demand for US-sourced gas.

“Commonwealth has staked its ground by securing an excellent location, developing a highly modularized approach to provide clean and affordable energy, and offering creative and flexible commercial terms,” said Farhad.

“I’m humbled and excited to have the opportunity to lead the organization in delivering its promise in a way that not only serves the interests of this company, its employees, the local communities and all other stakeholders, but is part of the overall advancement of the next generation US LNG facilities,” he stated.

BG veteran

In addition to his prior roles at Cameron LNG and BG Group of the UK, Ahrabi has also served over the past two years as an Independent Director at ARC Resources Ltd, a leading Canadian energy company with a diverse asset portfolio focused on responsible energy development.

Ahrabi holds a PhD in Reservoir Engineering from the University of Exeter (England) and a Bachelor of Science degree in Chemical Engineering from the University of Wales.

Commonwealth said its remaining pre-final investment decision activities were underway for a projected start of construction in 2023.

The project is expected to have an accelerated schedule that will allow building to be completed in three years using a predominantly modular approach for a projected start of commercial operations in 2026.

Annova LNG, the medium-scale US project planned for the south bank of the Brownsville Ship Channel in Texas, will not now be proceeding following a decision by investors to cancel the venture, while the Chief Executive has already left the project to join Canadian pipeline company TC Energy.

The US Department of Energy has issued a rule to exclude some licensing and environmental requirements for liquefied natural gas export projects that had previously been required in a show of support for the energy industry by the Administration of President Donald Trump.

The rule, which the Department of Energy issued in a pre-publication notice in the Federal Register, frees LNG export and import license applications from including environmental reviews that had been required under an environmental law, the National Environmental Policy Act.

The DoE said it was updating its National Environmental Policy Act (NEPA) implementing procedures pertaining to authorizations issued under the Natural Gas Act.

“These changes will improve the efficiency of the DoE decision-making process by saving time and expense in the NEPA compliance process and eliminating unnecessary environmental documentation for these actions that the DoE has determined normally do not have significant effects,” said the filing to be published in the Federal Register on December 4, 2020.

The DoE said in the notice that the rule would “save time and expense in the NEPA compliance process”.

The rule is effective 30 days after December 4 Federal Register publication.

Analysts said there was a possibility that a new President could overturn the DoE ruling, but the outcome of the November Presidential election is still unclear amid evidence of poll fraud, which has shocked many people in Europe, Asia, Africa and the Middle East and lowered their regard for American fairness.

The Trump Administration has overseen a surge in natural gas development and US energy independence as the nation has become the world’s third-largest LNG exporter after being an net importer before the shale revolution.

The DoE rule would not affect environmental reviews by the Federal Energy Regulatory Commission, the other government office that reviews LNG projects.

President Trump has supported supplying US allies with LNG and the largest recipients of cargoes have been to countries like South Korea and Japan as well as European countries which have been taking US LNG cargoes as an available alternative to Russian pipeline natural gas.

The Energy Information Agency declared the US the third-largest LNG exporter in May 2019, overtaking Malaysia, after shipments reached a new peak of 4.7 billion cubic feet per day.

The US has six export plants on stream, Sabine Pass and Cameron LNG in Louisiana, Corpus Christi and Freeport in Texas, as well as Cove Point In Maryland and Elba Island in Georgia.

Other projects are under development and about half a dozen are likely to be constructed in the next five years, mainly on the Gulf Coast of Texas and Lousiana. 

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.