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Tellurian offers equity stake in Driftwood LNG project; claims lower costs
October 23, 2017 / 8:08 AM / a month ago

Tellurian offers equity stake in Driftwood LNG project; claims lower costs

* Offering LNG to Japan at $2 per mmBtu cheaper than April offer

* Charging $1,500 per tonne for equity interest

By Jessica Jaganathan

SINGAPORE, Oct 23 (Reuters) - U.S. liquefied natural gas (LNG) project developer Tellurian Inc is offering billions of dollars in equity in its Driftwood project in Louisiana to make it more attractive for buyers, a senior company official said on Monday.

Tellurian is offering 60 percent to 75 percent equity interest in Driftwood Holdings, which comprises Tellurian’s upstream company, its pipeline and the upcoming terminal that can export 27.6 million tonnes per year of LNG.

It will charge $1.5 billion payable over a four-year period for 1 million tonnes of LNG, or $1,500 per tonne for the equity, Martin Houston, co-founder and vice-chairman of the firm, told reporters on the sidelines of the Singapore International Energy Week.

By taking a stake in the project, investors could eventually deliver LNG at even lower prices than the company claimed at a conference earlier this year since it has been able to cut costs at Driftwood, said Houston.

Tellurian can realize these lower costs because it already owns the gas it is feeding into the terminal and because the experience the company has in building terminals.

Tellurian was co-founded by Charif Souki and Houston who were previously senior executives at LNG producer Cheniere and BG Group, respectively.

Loading LNG at Driftwood is expected to cost $3 per million British thermal units (mmBtu) on a free-on-board (FOB) basis based on the combination of costs for the gas and the costs of cooling the fuel for transport at the terminal.

At that low loading price, even with shipping costs and the cost of financing the equity stake, buyers could deliver gas to Japan at $6 per mmBtu.

This is $2 lower than the $8 per mmBtu Tellurian had guaranteed to Japan for five-year fixed contracts from 2023, in April this year.

“By doing more work, refining the model, driving costs down, we now know we have taken $2 off that,” Houston said.

Asian spot LNG prices LNG-AS for December were at $8.70 per mmBtu last week.

So far, Tellurian has received “significant interest” in the equity model of the Driftwood project -- which is expected to start production in 2022 -- from large sovereign wealth funds and international portfolio players, Houston said, declining to go into specifics.

Reporting by Jessica Jaganathan; Editing by Kenneth Maxwell and Christian Schmollinger

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