Tellurian Completes First-Ever LNG Cargo Trade in 3Q

By Ron Nissimov  November 10, 2020

Liquefied natural gas (LNG) project developer Tellurian Inc. in the third quarter bought and sold its first LNG cargo under a master agreement reached last year, according to a report the company filed with the U.S. Securities and Exchange Commission (SEC).

Tellurian’s marketing arm bought the cargo in July and subsequently sold it to an unrelated third party, earning about $7 million in the transaction, management said in a third-quarter report to the SEC. Additional details were not provided.

Houston-based Tellurian entered into the master agreement in April 2019 partly to earn revenue and partly to prepare for potentially significantly more trading activity if its proposed Driftwood LNG export project in Louisiana comes on line. The agreement sets out the general terms under which Tellurian would buy LNG cargoes produced by other parties and then sell them.

Driftwood at full buildout would have capacity of 27.6 million metric tons/year (mmty), equivalent to about 3.6 Bcf/d of gas, but management has said the project could come on line with a first phase of 14.4 mmty at an all-in cost of $16.8 billion.

Tellurian in June delayed a planned final investment decision (FID) on the Driftwood project by one year to 2021, with production projected to start in 2024.

The project sustained a significant setback in late May, when India’s largest gas importer, Petronet LNG Ltd., canceled a preliminary deal to invest $2.5 billion in Tellurian for 5 million metric tons/year (mmty) of LNG.

Tellurian is still negotiating with Petronet and management expects rising LNG prices would lead to enough investment in the project to allow for an FID next year.

“Natural gas markets and prices have recovered worldwide,” CEO Meg Gentle said Friday. “Investment in new drilling and infrastructure is acutely needed to balance the market in 2021 and beyond. Building liquefaction terminals as fully integrated partnerships is the only way partners will secure the lowest cost of gas and be protected from the market’s inherent volatility.”

Tellurian management has said Driftwood could offer partners a free-on-board price of $3.50/MMBtu as its business model owns upstream assets and pipeline transportation. However, Tellurian requires partners to invest $500 million in the company for every 1 mmty of guaranteed offtake. Most U.S. projects charge customers long-term take-or-pay liquefaction fees of about $3.00/MMBtu, and customers procure gas at Henry Hub spot prices.

Tellurian owns 10,067 net acres and 71 producing wells in the Haynesville shale formation in northern Louisiana. Its natural gas production in the third quarter totaled 4.1 Bcfe with sales of $7.3 million, up from $6.3 million in the second quarter but down from the year-ago total of $9.3 million, management said.

Tellurian raised $32.8 million in the third quarter through issuing common stock, reduced debt by $33.9 million and extended the maturity date on a $60 million loan it obtained in 2019 from Nov. 23, 2021, to  March 23, 2022.

Tellurian had about $77.9 million in cash and cash equivalents at the end of the third quarter and about $80.8 million in outstanding debt.

Tellurian reported a net loss of $29.5 million (minus 10 cents/share) in the third quarter, compared with losses of $128.8 million (minus 53 cents) in the second quarter and $39.6 million (minus 18 cents ) in the year-ago period.

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Two US LNG terminals advance work as yet-to-be sanctioned projects struggle

10 Nov 2020 | 22:28 UTC


Calcasieu Pass, Golden Pass startup expected on time

Global market challenges remain amid supply overhang

Houston — The two US LNG export terminals currently under construction said Nov. 10 that they remain on target to start up on time, despite global market volatility, an unusually active hurricane season and ongoing impacts form the coronavirus pandemic.

The updates from Venture Global LNG's Calcasieu Pass in Louisiana and Qatar Petroleum- and ExxonMobil-backed Golden Pass LNG in Texas come as developers of new projects on the Gulf, Atlantic and Pacific coasts that have yet to be sanctioned continue to struggle to build commercial support.

The 10 million mt/year Calcasieu Pass and up to 18 million mt/year Golden Pass facilities are part of the second wave of US liquefaction capacity, slated to begin service by the middle of the decade. They will add to the six major facilities currently in operation. Another dozen or so projects that are actively being developed have yet to make final investment decisions. Many have delayed those decisions.

Golden Pass has been on a "full sprint" since beginning construction in 2019, Jeff Hammad, chief commercial officer, said during an LDC Gas Forums event in San Antonio that was webcast.

"You're going to start seeing a lot more steel and concrete," Hammad said. "And in spite of the collapse of the global energy market, a pandemic, and two hurricanes, we remain on track to have Train 1 operational in 2024."

At Calcasieu Pass, Venture Global recently received the first two of 18 pre-fabricated modular liquefaction trains and mixed refrigerant compressor skids from a Baker Hughes factory in Italy, according to a company statement.

Both units have already been positioned onto their foundations. Next, they will be connected to their respective heat exchangers, or cold boxes. Calcasieu Pass is scheduled to begin service in 2022.

As the coronavirus pandemic upended gas markets, many developers of new projects were forced to push back their targets for making final investment decisions until 2021 or later.

Analysts see lower-cost expansions of existing LNG export facilities as likelier to advance than new terminals.

Even on the Gulf Coast, where most of the US LNG export infrastructure is concentrated, project developers face greater risk than they used to, analysts say.

Recently some developers have expressed greater optimism about an improved environment for negotiating supply deals amid a strong rebound in natural gas demand.

Feedgas deliveries to the six US LNG export terminals in operation have soared to more than 10 Bcf/d from the summer doldrums, when cargo cancellations were widespread.

The ramp-up of US LNG exports is expected to continue in the coming months. But significant uncertainty remains about the export dynamics after the peak winter heating season, and rising coronavirus infection rates threaten to hamper commercial and industrial demand.

"Growth into 2021 will continue, but it's tied to COVID. The recent lockdown in Europe, etc., could impact the forecast for 2021 and beyond," BP Energy President and CEO Orlando Alvarez said at the LDC conference. "Until we get through COVID, there is still that range of uncertainty that we still need to really watch and consider and respect."

The other day I got a unionization notice for 9 planned Tellurian wells in S6 T11n R10w

Tellurian is in danger of losing their rights to Section 6 as the company has reported only 61 mcf  of production since last October.  They are within a month or so of a year with zero production.  They may apply for spacing of 9 wells but it is highly unlikely that they would drilled more than one or two.  I would like to see them drill one Haynesville and one Bossier well for an additional Bossier data point.


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