US LNG terminal developer Tellurian is working with compatriot energy services firm Baker Hughes to secure long-lead items for its Driftwood LNG project, while engineering and construction giant Bechtel continues to progress initial work at the site in Louisiana.
Tellurian issued a limited notice to proceed to Bechtel in March last year. Bechtel has driven over 9,000 piles and poured over 10,000 cubic feet of concrete for plant one and the storage tanks since then.
The Houston-based firm is expecting the development costs for the first phase of its Driftwood LNG export plant to reach $14.5 billion and the company is still working to secure financing for the project.
Under the first phase, Tellurian aims to build two LNG plants near Lake Charles with an export capacity of up to 11 mtpa.
Tellurian’s co-founder and executive chairman, Charif Souki said in a video update last week after the company’s second-quarter results that the company’s focus lately has been on two areas.
“The first is Driftwood LNG, where we continue to drive piles with Bechtel and continue to build the foundation,” he said.
“And that effort will continue with the second notice to proceed for the balance of this year and half of next year and we’ll prepare the site for the final notice to proceed,” he said.
Tellurian to spend $1.5 billion on Driftwood
Souki said that the “next step forward on Driftwood is to start securing long-lead items, mainly the turbines and the compressors that have been so important to both the the airline industry and the LNG industry.”
“And given all the recent orders for turbines, it is important to continue to secure our place in the queue to secure these facilities on time,” he said.
Souki said that Tellurian has spent up to date $16 million dollars securing the turbine purchases and will continue to work with Baker Hughes for these deliveries.
“So look for more news on that,” he said.
“When we finalize this, we will have spent $1.5 billion on Driftwood to prepare it for the final notice to proceed,” he said.
Soki said that Tellurian’s investment into the Drfitwood project continues to increase, “making our proposition to our partners increasingly compelling because a lot of the work has been done and a lot of the risk has been taken out of the picture.”
“I’ve said this before and I will repeat it again here, we will do the right deal for our shareholders,” he said.
Gunvor deal terminated, commissioning LNG cargoes for financing
Tellurian recently said that its LNG supply deal with trader Gunvor was terminated.
This was the only LNG supply deal Tellurian had for the planned Driftwood LNG project after both of its LNG supply deals with Shell and Vitol fell through.
Back in May 2021, Tellurian agreed to supply 3 million tonnes per annum on a free on board (FOB) basis to Gunvor Singapore for a period of 10 years.
As part of its financing strategy, Tellurian entered last month into a binding commitment letter with a fund of Blue Owl Real Estate Capital regarding the sale and leaseback of Driftwood land.
According to Tellurian’s latest corporate presentation posted on its website, the Driftwood capital structure includes $7 billion bank debt, $2 billion lease/mezzanine financing, $1.8 billion partner equity, $1.5 billion Tellurian equity, and also $2.5 billion contingent equity.
If the six months of commissioning LNG cargoes cover the contingent equity, the contingent equity will not be funded, according to Tellurian.
This is probably the first time Tellurian mentioned that commissioning LNG cargoes could cover part of Driftwood financing.
Tellurian added it is seeking partners to invest 55 percent of the equity for 6 mtpa capacity in the first phase of the project.