Tellurian’s commercial activities are “moving well and at pace” as the company continues to work with Bechtel on the site at its Driftwood LNG project in Louisiana, according to Tellurian’s co-founder and chairman, Martin Houston.
These commercial activities include SPA (sales and purchase agreement) discussions, equity discussions, and now, “some new approaches”, Houston said in his second letter to shareholders dated January 29.
“I am pleased with progress and whilst I will not be drawn on dates or outcomes, I would say that we have clear internal timelines and anticipate some near-term decision points,” he said.
In December, Tellurian appointed Houston as the chairman replacing Charif Souki, who has left the Driftwood LNG terminal developer.
Houston said in his first letter to shareholders in December that Tellurian hired a financial adviser to assist with shaping commercial structures as well as balance sheet management.
The company appointed investment banker Lazard, and in the meantime there was a press report that Tellurian was also looking into a potential sale of the company.
Houston said in the new letter that “focus of the Lazard engagement is on commercial matters.”
“While it is our policy not to comment in the media on M&A matters, we are aware of a misleading headline in a press report last week regarding our financial advisor,” he said.
“Let me clarify: first and foremost, the purpose of hiring Lazard was to give us advice on unlocking the value of our asset base and to help expand our thinking. For customers and potential equity investors, we want to widen the commercial aperture. We believe Driftwood LNG is a powerful platform: our timeline, EPC contract, existing sitework, and fully permited status have high value in a growing LNG market,” Houston said.
Moreover, Houston said that Tellurian also wanted to access the “considerable skills and experience” of George Bilicic, the global head of Lazard’s efforts in energy, and a member of Lazard’s global executive committee, who will be leading their Tellurian engagement.
“He is an experienced advisor to energy companies of all types and has specialized knowledge in the LNG industry from his role as president at Sempra Energy,” Houston said.
As per the Driftwood project, Tellurian issued a limited notice to proceed to compatriot engineering and construction giant Bechtel in March 2022 and it said in August last year that Bechtel completed piling work for the first plant and also concrete pouring for all plant one compressor foundations.
Tellurian also recently released the December construction report.
Under the first phase, Tellurian aims to build two LNG plants near Lake Charles with an export capacity of up to 11 mtpa.
However, the company is still working to secure financing for the project.
Tellurian previously said it expects the first phase to cost about $14.5 billion with about $6 billion equity investment.
“We continue to work with Bechtel on the site at Driftwood under the LNTP2 (limited notice to proceed) program and explore options for additional scope depending on the progress on the commercialization front,” Houston said in the letter.
“We are balancing our spend across Driftwood, the upstream company and G&A. As I have
previously mentioned, we have made significant cuts to the later, without impeding any activities,” he said.
US LNG export approval pause
Houston also commented on the recent move by the Biden administration to “temporary pause” pending decisions for LNG export terminals.
The Biden administration and the Department of Energy (DOE) announced last Friday, that the DOE will temporarily pause review and approval of all new and pending applications for export authorization to non-free trade agreement (non-FTA) countries while DOE updates its assessment process.
“Again, let me clarify an important point. We already have our license to export LNG to non-FTA countries which is valid through 2050. As we get closer to completing construction, we plan to adjust the in-service date condition under that license to accommodate our construction timeline,” Houston said.
“We will continue to monitor the DOE’s assessment process review and any impacts it may have to our non-FTA export license. I would add that in the mean me, the global demand outlook for LNG has not changed, so any scarcity will drive opportunity for Tellurian,” he said.
“I am as motivated as all of you to realize value for Tellurian’s stakeholders and am committed to do the related work needed to realize such value. I am a large Tellurian shareholder and have no greater purpose than getting this job done,” Houston said.