Tellurian expects first phase of Driftwood LNG to cost $14.5 billion

US LNG firm Tellurian is now expecting the development costs for the first phase of its Driftwood LNG export plant in Louisiana to reach $14.5 billion.

Under the first phase, Tellurian aims to build two LNG plants near Lake Charles with an export capacity of up to 11 mtpa.

Prior to this new estimate, Tellurian expected that the development costs for the first phase of the LNG terminal to reach some $13.6 billion.

The company’s February corporate presentation shows that Tellurian expected EPC cost/tonne of $815 and capital cost/tonne of $1,059.

Tellurian updated these estimates in its May corporate presentation released on Wednesday along its first-quarter results.

The firm now expects total development costs to reach $14.5 billion with EPC cost/tonne of $815 and capital cost/tonne of $1,100.

The rise relates to owner’s costs, which include terminal labor, opex prior to LNG production, management fee to Tellurian, as well as financing, interest, and other costs, the presentation shows.

Tellurian recently released a drone footage showing the activities at the Driftwood LNG site in April, while it continues to work to secure financing for the project.

The US LNG firm issued a limited notice to proceed to compatriot engineering and construction giant Bechtel in March last year.

According to Tellurian, since April last year, Bechtel has completed demolition of all existing land structures, and has cleared and backfilled all critical Phase I areas.

In addition, the firm has driven over 30 percent of all Phase I piles and has completed foundation work for Plant 1 compressors.

Tellurian said in the presentation that upcoming Bechtel activities include completing the piling for Plant 1 and the LNG tanks, continuing to pour foundations, and constructing the marine offloading facilities.

Seeking partners

Tellurian previously said it has invested about $1 billion up to date in the project.

It recently signed a land sale and leaseback deal for the Driftwood land worth $1 billion with a New York-based institutional investor.

In addition, Tellurian said in April it will ask its shareholders at its annual meeting to approve doubling the number of its common shares.

The company plans to hold the meeting in Houston on June 7.

In April, Tellurian’s co-founder and executive chairman, Charif Souki, said he is “highly confident” that the company will secure $7 billion from banks to finance the first phase of its Driftwood LNG export project.

Tellurian is also seeking partners to invest 45 percent to 55 percent of equity in the first phase.

This would bring in about $4.5 billion in project equity.

Tellurian to stop drilling

Commenting on the first-quarter results, Souki said on Wednesday that the company repaid $166.7 million in debt in the first quarter.

He said the company continues to have $150 million in the bank at the end of the quarter.

Tellurian produced 19.3 billion cubic feet (Bcf) of natural gas for the quarter ended March 31, 2023, as compared to 6.1 Bcf for the same period of 2022.

As of March 31, Tellurian’s natural gas assets included 30,915 net acres and interests in 152 producing wells.

“Given that prices have come down very dramatically, we have decided to discontinue the drilling for the time being,” he said.

“We’re bringing some wells on stream now as we talk, and we also have wells that will stay in inventory to be brought back very quickly when the prices are justified,” Souki said.

“So for the time being we think we can say that 200 million a day for the balance of the year, with minimal expenses, you can see 200 million a day multiplied by the gas prices gives you some significant cash flow,” he said.

He said that the company has now more than 30,000 acres with over 400 locations and “that will allow us very quickly in two to three years at the right time to ramp up production to get to about 65 percent of the gas that we need for our share of Phase 1.”

Souki added that the company intends to add 10,000 acres this year and next year “so that we’re in a position by the time we need it for Driftwood in 2027 to have a 100 percent of our production needed for our share of Driftwwod produced organically by our own company.”

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