PARIS French oil and gas major Total said on Tuesday it will buy a 23 percent stake in Tellurian Investments, a private U.S. gas projects operator, for $207 million as it pursues its drive to secure more downstream gas market share.
Total, which is paying $5.85 a share for the stake, and Tellurian will jointly develop an integrated gas project, from producing gas in the United States to delivering liquefied natural gas (LNG) to international markets.
"Investing in Tellurian at an early stage will give us the opportunity to potentially strengthen our mid- and long-term LNG portfolio thanks to a very cost competitive project," Philippe Sauquet, Total's president of gas, renewables and power, said in a statement.
The company has said it plans to increase its LNG production to 20 million tonnes by 2020 from 12 million currently. LNG is expected to contribute 20 percent of Total's output and 30 percent of its upstream profits by 2020.
The Tellurian deal follows last month's announcement that a consortium led by Total has been awarded a deal to build an LNG import terminal in Ivory Coast. The project is meant to feed the country's growing electricity demand and become a hub in the West Africa sub-region.
Tellurian Investments' Driftwood project, currently in the engineering design phase, aims to be the lowest-cost LNG producer on the U.S. Gulf, targeting a break even cost of slightly below $6 per million British thermal units (mmBtu) on a free-on-board basis.
Giles Farrer of consultancy Wood Mackenzie said Total's acquisition of the stake in Tellurian and Monday's announcement that BP is buying into projects in Mauritania and Senegal are signs that the majors are going big on small-scale LNG projects.
"The jury is still out on whether small-scale LNG is really cheaper per tonne of LNG produced than large scale, but it's certainly a more manageable investment and that's appealing in the present environment," Farrer said.
Tellurian entered into a merger agreement with Magellan Petroleum Corporation on August 2, 2016, and expects the agreement to close in the first quarter of 2017.
(Reporting by Bate Felix; Editing by Adrian Croft)