GULF EXPANSION
Tellurian closes a deal first announced in April, expanding its export presence in the Gulf.
The Houston liquefied natural gas company Tellurian is edging closer to a final investment decision on its Louisiana LNG terminal after finalizing a deal with Total SA last week to increase the French oil major’s investment in the project to nearly $1 billion.
Tellurian said Wednesday that it has closed a deal first announced in April. Under the agreement, Total will buy 1 million metric tons of LNG per a year from Tellurian’s Driftwood LNG terminal outside of Lake Charles, La. Total also will invest $500 million into Tellurian’s parent company, Driftwood Holdings LP. And of one its subsidiaries, Total Gas & Power, will also buy 1.5 million metric tons of LNG from Driftwood.
This adds to the French oil major’s previous investments in the project, bringing its aggregate investment in Tellurian’s portfolio to $907 million.
Tellurian’s deal with Total is another step in the expansion of the LNG export industry along the Gulf Coast as companies tap the flood of cheap natural gas from Texas shale plays. Also last week, Tellurian’s Houston competitor, Cheniere Energy, said the second processing unit at its Corpus Christi complex has produced enough LNG for a first commissioning cargo, an important milestone as the project gears up for start up later this year.
A commissioning cargo is one that is loaded while an export terminal is undergoing testing and inspection in advance of commercial operations.
Cheniere began shipping from its first processing unit at the Corpus Christi last year. Construction on a third processing unit there is scheduled to be completed in 2021.
Increasing bets
Total, meanwhile, has been on an aggressive path to boost its investments in American liquefied natural gas. Beyond Tellurian, Total also is a partner in Sempra Energy’s Cameron LNG project along the Louisiana Gulf Coast. It recently bought into Freeport LNG project, both on the Gulf Coast.
The world’s biggest oil companies are increasing their bets on natural gas as governments around the world seek to lower greenhouse gas emissions. Natural gas, the cleanest-burning fossil fuel, is viewed as transition fuel as the world moves towards renewable energy such as wind and solar.
Tellurian is planning to make a final investment decision later this year on the $28 billion Driftwood project, which includes an export terminal and associated pipelines. It also has a deal with the British energy and commodities company Vitol to invest in the project and buy its natural gas, plus a tentative investment and purchase agreement with the Indian oil and gas company Petronet.
“The agreements we have executed with Total confirm the business model for the Driftwood project, establishing it as an LNG joint venture partnership with an implied value of $13.8 billion,” said CEO Meg Gentle. “We intend to finalize the agreements with the remaining partners and make FID in 2019. At full capacity, Driftwood will be capable of exporting approximately 4 billion cubic feet per day of natural gas, providing solutions for the acute U.S. oversupply (of natural gas) and delivering cleaner air to the world.”
Driftwood LNG would process 27.6 million metric tons of liquefied natural gas annually — enough to fill up an LNG tanker every day. Tellurian has approval from federal regulators to build the project.