SHREVEPORT, La.—The global LNG trade is booming and Tellurian Inc. (NASDAQ: TELL) is going all in. On any given day some 800 billion cubic feet (Bcf) of LNG is somewhere on the water and that will rise to 1 trillion cubic feet (Tcf) by 2020, with more than 500 LNG vessels plying the oceans today.

“We feel it’s inexorable that LNG demand will grow globally,” said John Howie, president of Tellurian Production Inc., the company’s upstream arm, speaking at Hart Energy’s DUG Haynesville Conference & Exhibition at the Shreveport Convention Center. “It is going to displace coal, and too, many counties in Europe are reluctant to enter into gas contracts with Vladimir Putin, and I don’t blame them.”

Tellurian is building an LNG export facility, Driftwood LNG, near Lake Charles, La., and it is buying acreage in northern Louisiana to produce some of its own equity gas. Its preferred supply source is the Haynesville, followed by the Eagle Ford dry gas window.

“The Haynesville is close, prolific and cheap,” Howie said. “Our numbers say gas demand [for LNG and petrochemicals] in southwest Louisiana is going to triple, from 4 Bcf/d to 12 Bcf/d.”

He predicted “a cha cha line” of vessels will be lined up every day to load LNG from Driftwood once it comes online in 2023. Construction is supposed to begin this year at the export facility, which will have capacity of 27.6 mtpa or 4 Bcf/d. It will have three marine berths and 12 Bcf of storage.

The company is unique in that some of its LNG buyers are funding the project by taking equity stakes now in exchange for delivered LNG supply later when the facility goes online. In addition, two construction companies have bought in. These partners include Total, which invested $207 million, Bechtel with $50 million and GE with $ 25 million.

Open season has been completed on Tellurian’s two proposed pipelines; one from Haynesville and one from the Waha area of the Permian Basin in West Texas. Each will move 2 Bcf/d; both were oversubscribed, he added.

As an upstream player, Tellurian hopes to produce 1.5 Bcf/d by 2023 and even so, the company will have to source 15 Tcf of supply to fulfill its existing LNG contracts. Last fall it acquired some acreage and production from Rockcliff Energy LLC in three parishes for $85 million, but Howie implied more such transactions are coming. Recently Goldman Sachs funded a $60 million term loan to support Tellurian’s operated and non-op drilling activity this year.

Howie said any large LNG project such as Driftwood needs customers lined up to establish commerciality. “It’s hard to raise $30 billion,” he admitted. “I think we underestimated this. We have an entrepreneurial mindset you need to have to enter into long-term contracts, but most of our customers are governments and national oil companies who do not have that same mindset.”

Comments