Tellurian drops equity-ownership condition for Driftwood LNG project

HOUSTON, Sept 8 (Reuters) – Tellurian Inc (TELL.A) will sell liquefied natural gas (LNG) supplies to non-equity holders to bring its long-delayed Driftwood LNG project to fruition, Chairman Charif Souki said this week.

Tellurian aims to offer up to 11 million of its 27.6 million tons per annum (MTPA) output under offtake agreements to get Driftwood across the finish line, he said.

The move is a change from a year ago, when Tellurian canceled an agreement to supply 3 MTPA to commodities trader Vitol Inc after deciding to focus on selling equity stakes in the project to potential customers.

“Our teams are now re-offering, in addition to what we have offered in the past, a standard offtake agreement at a price that supports the financing,” Souki said in a video update of the project.

Tellurian has several times altered its approach to recruiting customers and investor financing for the first phase of the $14.5 billion Louisiana plant. At an investor presentation last month, the company said it might sell the first six months of its LNG output to help finance the project.

“We are simply responding to what potential customers are asking for and adjusting accordingly,” said a person familiar with the company’s strategy. The revised plan will have a mix of equity and offtake agreements, said the person who requested anonymity to discuss corporate strategy.

Offering sale and purchase agreements (SPAs) as part of its business model is a good move, said Ira Joseph, an LNG expert and Senior Research Associate at the Center on Global Energy Policy at Columbia University.

“Signing SPAs has proven to be a good way to bring LNG projects to a final investment decision (FID) so if they are more open to that in a different and new way than they were before, that sounds positive to me,” he said.

Tellurian this week was at the Gastech conference in Singapore, where it told Reuters that it hopes to announce equity partners by year end.

Souki said in his webcast on the sidelines of the conference that LNG buyers are becoming more aware of rising costs to build LNG plants and the risk of fees under older contracts falling short of covering liquefaction costs.

“There is a new sense of reality on what it’s going to by year end” to complete these plans, Souki said in the video.

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