Tellurian to start construction Driftwood LNG in April

LNG carrier delivers to Asia. Photo: Reuters.

Tellurian will begin full construction of its Driftwood LNG export terminal in Louisiana in April, although financing for the project might not be in place by then, the company’s chairman, Charif Souki announced.

In a recent podcast on the company’s website, Souki said the company is working to nail down complete financing for the $15.5 billion project, which will be built by Bechtel. The company expects to have financing complete “in short order” but might not have complete project financing finalized before construction starts.

“Financing might be done by April, but it could start a little bit longer,” he said.

Tellurian has access to enough capital to get through the first year of construction and is in discussion with 45 different financial institutions to finance the project, each of which has different criteria and requirements for financing.

“This is like herding cats,” he said.

The wide spread between prices for natural gas in Henry Hub and international markets is the primary reason the company is confident that it can start construction before financing is complete. “I know people normally want to talk about FID (final investment decision), but that doesn’t apply here,” he said.

Bechtel has a $15.5 billion lump sum contract for engineering, procurement and construction of the plant that guarantees a cost, performance and schedule, Tellurian said. It has received the most important permits required for construction and operation and has completed about 30% of the engineering after investing about $150 million, the company said.

A year and a half ago, Tellurian urged analysts to watch pricing benchmarks in Asia and Henry Hub as evidence of the need for additional LNG.

Tellurian has 10-year agreements with Gunvor, Vitol and Shell, to take about 9 million tonnes/year from the Driftwood LNG plant, Platts reported.