Tellurian signs Us $7.5bil pact with Petronet

Deal among the largest investments to ship US shale gas

NEW YORK: Tellurian Inc said it signed a Us $7.5bil agreement for India’s Petronet LNG Ltd to buy into its proposed liquefied natural gas terminal in Louisiana, in what could potentially be one of the largest foreign investments in the United States to ship shale gas abroad.

Petronet will spend Us$2.5bil for an 18% equity stake in the Us $28bil Driftwood LNG terminal – the largest outside holding so far in the project – and negotiate the purchase of 5 million tonnes of gas per annum. The remainder of the total will come from debt, Tellurian chief executive officer Meg Gentle (pic) said.

The companies plan to complete the accord by March 31, by which time Tellurian hopes to have signed up partners to enable it to proceed with the project.

“We will sign the document sometime in the first quarter and we will have financing ready to close simultaneously, and then we will begin construction,” Gentle said in a telephone interview. “India is one of the fastest growth markets for LNG and should soon become the second-largest LNG importer.”

The deal, signed in Houston in the presence of Indian Prime Minister Narendra Modi, underscores a record year for the LNG industry, with tens of billions of dollars worth of export projects given the green light. The surge of new supply from America’s trove of shale gas has rendered the once-premium fuel accessible for emerging markets such as India, currently the sixth-largest buyer of US LNG.

“People should not be surprised this came,” said Tellurian co-founder Charif Souki, who also founded America’s largest LNG exporter Cheniere Energy Inc.

“The United States and India have a significant issue diametrically opposed. We have too much gas that we don’t know what to do with and India needs greater gas, and one million tonnes a time is not going to solve the problem.”

The Petronet deal, the largest by an Indian company in US LNG, comes days after the gas industry’s all-important Gastech conference and coincides with Modi’s much-anticipated visit to Texas.

Petronet’s investment is vying to be the largest by a foreign entity with one that Sempra Energy expects to finalise in Texas with Saudi Aramco.

Tellurian expects to finalise the last 4 million tonnes needed for Driftwood’s first phase with one or two partners in the coming months, Gentle said. Petronet’s share represents about Us$2bil in annual fuel sales for the life of Driftwood, she said.

“It supports the drilling industry and the pipeline industry, and there is going to be an enormous amount of resources,” Souki said. — Bloomberg