Tellurian Inc. is seeking $3.2 billion from equity partners to complete construction of Phase I of the proposed 27.6 million tonnes per annum (mtpa) Driftwood LNG LLC export facility, Tellurian executive chairman Charif Souki said in a corporate video on Feb. 7.

“An optimal liquefaction facility of around 11 mtpa in the U.S. will cost $14 billion,” Souki said in the video posted on Tellurian’s website.

Souki said Tellurian originally sought $4.5 billion in equity, but is now seeking only $3.2 billion after spending $1 billion in 2022 and in 2023, anticipates spending $300 million. The remaining capital to cover the project cost would include $7 billion in debt and $1.5 billion in mezzanine financing. 

Driftwood LNG is considered an important U.S. export development since it would help the country boost LNG exports to world markets still reeling from the impacts of reduced energy flows from Russia after President Vladimir Putin’s military offensive launched in Ukraine early last year.

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Assuming a market price of around $16/MMBtu, freight-on-board costs of $7.33/MMBtu and shipping costs of $1.68/MMBtu, the market is giving a $7/MMBtu differential, Souki said. The price is currently in the $10/MMBtu range and has been as high as $25/MMbtu-$30/MMbtu in the last 12 months, he said.

“In that context with the $7/MMBtu of margin, you’re looking at the [completed] project generating… $10 billion of free cash flow, and this is what we’ve been fighting for and been pushing for because rather than making $0.25 [per MMBtu] to $0.50 per MMBtu if everything goes well, we would rather be exposed to that $7 [per MMBtu] to $10 per MMbtu margin, which we view is going to be the rule, not the exception, for the next 20 years,” he said.

“With all the major companies flush with cash today and looking for investment, I think the time could not be better to get something like this done,” Souki added.

However, Tellurian has encountered headwinds in progressing its Driftwood project. In September 2022, the company pulled a $1 billion bond deal and intensified its search for equity partners after losing two supply deals with its biggest potential customers Shell Plc and Vitol SA.

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Driftwood LNG, located on the west bank of the Calcasieu River, south of Lake Charles, La., would be completed in two phases. Phase I is a two-plant development to provide 11 mtpa by early 2026. Phase II is a three-plant development that would provide an additional 16.6 mtpa, according to details provided by the U.S. Energy Information Administration. 

Tellurian expects to fund Phase II with cash flow from Phase I, according to a July 2022 corporate presentation on its website.

Souki dumps 1.8 million Tellurian shares

Souki, who expressed optimism about raising financing for the Driftwood project, sold a small percentage of his Tellurian shares a day after the corporate video posted.

The Tellurian chairman, who sold 1.8 million shares on Feb. 8 at a price of $1.92/share, still owns around 26.9 million Tellurian shares, according to E*Trade Securities LLC. The market value of the deal was approximately $3.4 million, according to data from the online broker.

Executives at Tellurian didn’t immediately respond to email requests from Hart Energy for details regarding the search for equity partners and new offtakers and the reasoning behind Souki’s recent share divestment.

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