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Tellurian offers equity stake in Driftwood LNG project

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LNG Industry,

Reuters reports that US 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.

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

It will charge US$1.5 billion payable over a four-year period for 1 million t of LNG, or US$1500 per t for the equity.

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.

Tellurian can realise 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.

Loading LNG at Driftwood is expected to cost US$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 US$6 per mmBtu (US$2 lower than Tellurian had guaranteed to Japan for five-year fixed contracts from 2023, in April this year).

So far, Tellurian has received ‘significant interest’ in the equity model of the Driftwood project – which is expected to start production in 2022.

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