Driftwood LNG developer Tellurian proceeds to the first phase of two factories: Souki

Strong points

The initial plan for the export project is two possibilities smaller

Commercial, gas production and bank financing efforts continue

Tellurian appears to be proceeding with the smaller of the two possibilities for the size of the first phase of its Driftwood LNG export terminal project in Louisiana, based on comments from Executive Chairman Charif Souki in a podcast posted to the site. Company Web July 20.

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The developer has yet to clear the full construction of the facility up to 27.6 million tonnes / year, although two medium-term supply contracts signed earlier this summer with commodity traders Gunvor and Vitol put Tellurian on a solid trading path.

In its last investor presentation published on May 27, Tellurian estimated a first phase of 16 million tonnes / year for the liquefaction facility. He said the same thing in a January presentation. During the podcast, Souki said that “65% of the capacity of the first phase” had been sold to Gunvor and Vitol.

At 6 million mt / year combined for the two 10-year trade agreements, this would imply a first phase of 9.2 million mt / year. This would suggest a first phase of two factories, each with up to four trains. Earlier in July,

a partnership and supply agreement in 2019 with the French TotalEnergies which covered 2.5 million tonnes / year of volumes of driftwood has been terminated.

Tellurian spokeswoman Joi Lecznar said Souki’s comments corresponded to two possibilities the company had raised in the past.

We always said we would do it with two or three factories first, whichever makes sense, ”Lecznar said.

During the podcast, which has become a regular feature in recent months, Souki said Tellurian continues to work on new supply agreements to cover the remaining capacity of the first phase of the project. It is also building its drilling portfolio upstream and arranging the bank financing needed to begin full construction, he said.

He said that Tellurian conclude sufficient trade agreements to support the first phase of the project “soon.” In an interview with S&P Global Platts on May 12, Souki said the work would be completed “within the next few weeks.” This time has passed.

“We’re not going to do a bad job for the sake of speed and timeliness,” Souki said on the podcast. “We will continue to make sure that we get all of the items needed to do this.”

Tellurian said

that it wants to produce all the gas it will need to supply Driftwood and would not sanction the project until it obtains sufficient upstream reserves for the first phase of the terminal project.

Based on its current drilling program in the Haynesville Shale, Tellurian expects to produce nearly 100 million cubic feet per day by the end of the year, three times the volume it produced at the end of 2020, Souki said. The company will need to control many more drilling – around 1.5 Bcf / d – to meet its target, he said.

“This will be the main focus of our efforts over the next few months,” Souki said.

Tellurian is considering a business combination to develop its upstream portfolio. Souki didn’t touch on this topic on the last podcast.

Bank financing

Earthlingaims to give Bechtel notice to proceed with full construction of the terminal by the end of the first quarter of next year. Souki said Tellurian expects to be able to announce which banking group will fund the project by the end of 2021. He described banks as more bullish about Driftwood due to strong market fundamentals in recent months. .

“A year ago we took a very controversial position. We told you, ‘Look at the Henry Hub prices in the United States, look at the JKM (Platts) price in Asia and look at the number of platforms in the United States. United and keep watching these three things – in our opinion, the prices of Henry Hub and JKM are abnormally low and unsustainable, ”said Souki.“ It was a time when people were saying lower for longer. We said “this is not going to happen we are going to see a resurgence in prices at both the Henry Hub and the JKM and if you watch the number of platforms it will give you an indication of how fast this is going. happen.'”

He added: “Well here we are a year later. Henry Hub has more than doubled and JKM has more than quadrupled. We are not afraid of controversial positions based on research and numbers and things we believe. after doing our homework. “

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