US Tellurian builds up for marketing splash at Gastech

US developer Tellurian Investments, which is planning the proposed Driftwood LNG export project in Louisiana, is preparing to launch marketing details for prospective buyers by April at the Gastech conference in Japan.

Tellurian this week disclosed figures for the plant’s cost of construction and potential tolling fees which would make it highly competitive against other planned US projects.

The company recently completed a reverse merger with junior producer Magellan Petroleum as of 10 February, and is now a publicly-listed entity on the NASDAQ.

According to a presentation given by Tellurian President and CEO Meg Gentle, a former Cheniere executive, the company estimated another 90mtpa of additional liquefaction is required to meet LNG demand by 2025. The presentation was made at a Credit Suisse investment conference in Colorado.

Tellurian’s planned 26mtpa greenfield project is located near Lake Charles, Louisiana, designed in a 20-train module with each producing 1.3mtpa, developed by Chart Industries.

The project also requires a 96-mile (154km) pipeline with capacity of around 4 billion cubic feet (113 million cubic metres)/day.

Tellurian presented an estimated $500-600/tonne engineering, procurement and construction (EPC) cost with an overall $13bn to $16bn figure for the whole project, excluding owner and financing costs.

Typically, the so-called brownfield US LNG export projects built from import terminals were viewed as having a cost advantage due to the existing infrastructure.

According to the International Gas Union’s (IGU) 2016 report, liquefaction projects between 2008 and 2015 have seen unit cost increases for greenfield projects from $495/tonne to $1,162/tonne, while brownfield projects have increased to an average of $502/tonne, up from $297/tonne.

But the greenfield Magnolia LNG project, developed by Australia’s LNG Limited, has touted advantageous project cost estimates, at a range between $495/tonne and $544/tonne for four trains, also in Lake Charles.

In its 14 February presentation, Tellurian presented a possible breakeven cost scenario of $7.74/MMBtu on a delivered ex-ship (DES) basis from the US Gulf of Mexico, assuming a $50/bbl crude oil price.

Depending on the assumption for the US Henry Hub futures price and less than $2.00/MMBtu calculated for shipping, this could equate to a possible tolling fee around $2.00-2.50/MMBtu.

In its presentation, Tellurian expected to launch its marketing efforts at the Gastech conference in April in Tokyo and aimed to conclude sales and purchase agreements by the first half of 2018.

Driftwood LNG is currently in the permitting process with US regulator Federal Energy Regulatory Commission (FERC).

Driftwood is expected to receive full FERC order by the first quarter of 2017, an ambitious target considering the project initially filed for notice in May 2016. FERC applications typically have taken 18 months to longer, depending on the project.

A financial investment decision was expected by mid-2018 and, pending regulatory approval, construction could also begin by 2018, according to Tellurian.

First LNG from Driftwood was expected to be operational by 2022, with all LNG trains operational by 2025.

In December 2016, France-based Total took on a 23% equity stake in the project totaling $207m in shares.

Total already has a 2mtpa sales and purchase agreement for Sabine Pass Train 5, which is due to come online by 2019. Total’s tolling price from Sabine Pass was $3.00/MMBtu. Besides Total, GE Oil and Gas also made a $25m preferred equity investment, announced in November 2016. ruth.liao@icis.com