Tellurian to prepare Driftwood LNG site for full construction, build new pipeline
Long-term Louisiana port lease to be signed
Line 200 and 300 designed to ease feedgas bottleneck
Tellurian will soon sign a long-term lease with the port authority where its proposed Driftwood LNG facility is to be built in Louisiana so it can begin preparing the site for full construction, executive chairman Charif Souki said in a message to investors June 22.
The developer, following two commercial deals that will help move the project forward, also plans to refresh the pricing in its agreement with contractor Bechtel, though Tellurian does not expect costs to significantly change.
The disclosures came as Tellurian said it filed a formal application with US regulators to build a new 37-mile pipeline that will originate near Ragley in Beauregard Parish and end near Carlyss in Calcasieu Parish, near where the LNG export terminal is to be located. At one time, Tellurian had planned to build four pipelines connecting supplies in the US Gulf Coast region, before deferring three of them amid commercial challenges that have recently been overcome.
"In the short future, look for that lease to be signed, effected and announced so that we can start the work that we need to do this summer, and the activities will be taking place this summer," Souki said in a brief podcast posted on the company's website.
To get the Driftwood site ready for full construction, a state highway needs to be widened to accommodate about 5,000 workers, a pipeline that currently crosses the property needs to be relocated, and the saturated soil needs to be remediated to allow heavy equipment at the site, Souki said. That work will take six to nine months, he said.
Tellurian continues to expect to give Bechtel a notice to proceed with full construction of the terminal by the end of the first quarter of next year, Souki said.
The up to 27.6 million mt/year export facility is to be built in phases, with the first phase covering about 16 million mt/year of capacity.
After a two-year lull in firm commercial activity, Tellurian signed sales and purchase agreements -- a week apart in late May and early June -- with commodity traders Gunvor and Vitol for a combined 6 million mt/year of Driftwood supplies. Each of the deals cover a 10-year period, with the supply indexed to a combination of the Platts JKM and Dutch TTF, netted back for transportation charges. The LNG would be delivered on a free-on-board basis from Driftwood.
Tellurian's only other firm commercial deal tied to Driftwood that has been announced to date is a 2019 agreement with France's Total that covers 1 million mt/year of partner volumes and 1.5 million mt/year of marketing volumes. Total can back out of its Driftwood commitments if Tellurian does not declare a final investment decision by the end of June, which seems unlikely that Tellurian will do.
Souki told S&P Global Platts in May that the Total agreement is "not going forward in the present form" and would need to be amended. Building the terminal is no longer dependent on the Total agreement, he said at the time.
Line 200 and 300
Meanwhile, Tellurian's new dual 42-inch diameter pipeline, Line 200 and 300, would be in addition to the Driftwood Pipeline it plans to build as the main feedgas conduit to the LNG terminal. The proposed route would connect supply located 21 miles north of Lake Charles to the demand market within and south of Lake Charles, bypassing what Tellurian said has become a constrained and expensive transportation pathway.
Electric-driven compression will be used to cut the pipeline's carbon emissions, Tellurian said in a statement. The two recent commercial agreements for Driftwood supplies include provisions for tracking and documentation of LNG cargo emissions, Tellurian said.
In an interview with Platts in March, Tellurian CEO Octávio Simões said the company planned to produce all the natural gas it will need to feed Driftwood and would not sanction the project until it had secured sufficient upstream reserves for the first phase.
In his podcast message to investors, Souki said Tellurian would soon provide an update on what it is doing on the upstream front.