Oil major Royal Dutch Shell has agreed to buy 3 million mt/year of LNG from Tellurian's proposed Driftwood LNG export terminal in Louisiana, the companies said in a joint statement July 29.
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The 10-year agreement is similar in terms to ones Tellurian signed with commodity traders Gunvor and Vitol earlier in the summer.
Total offtake commitments to Driftwood LNG now stand at 9 million mt/year, just shy of the expected 9.2 million mt/year two-plant first phase of the project. Each plant is expected to have up to four liquefaction trains.
"With these SPAs, we have now completed the sales to support the launching of the first two plants," Tellurian CEO Octavio Simoes said in the statement. "Tellurian will now focus on financing Driftwood, in order to give Bechtel notice to proceed with construction in early 2022."
The developer has yet to sanction full construction of the up to 27.6 million mt/year facility, although the three medium-term supply contracts that have now been signed put Tellurian on a solid path. A 2019 partner and supply agreement with France's TotalEnergies that covered 2.5 million mt/year of Driftwood volumes was terminated.
The sale and purchase agreements, or SPAs, signed with Shell are on a free on board basis at Driftwood, indexed to a combination of the Platts JKM and the Dutch TTF, each netted back for transportation charges.
Tellurian has said that it wants to produce all the gas it will need to feed Driftwood and would not sanction the project until it had secured sufficient upstream reserves for the first phase of the terminal project.
Based on its current drilling program in the Haynesville Shale, Tellurian expects to have close to 100 MMcf/d in production by the end of the year, three times the volume it was producing at the end of 2020. The company has said it will need to control substantially more drilling -- about 1.5 Bcf/d -- to reach its goal.
Tellurian has been considering a business combination to grow its upstream portfolio.