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Tellurian closing in on equity partners to fund Driftwood LNG project, CEO says

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Tellurian closing in on equity partners to fund Driftwood LNG project, CEO says

Tellurian Inc. has identified all of the partners it needs to secure sufficient funding for the first phase of its proposed Driftwood LNG export project in Louisiana, though work still needs to be done finalizing agreements, CEO Meg Gentle said Sept. 4.

During a Barclays energy conference webcast from New York, Gentle worked to allay investor concerns that the project will fall short of the funding it needs. While the project is already backed by a major industry player in France's Total SA and being developed by a team that includes many of the key people who got Cheniere Energy Inc.'s Sabine Pass facility off the ground, Gentle has had to fend off worries that Driftwood will not be able to get the money for construction.

A Tellurian investor presentation released last month held to the company's expectation of reaching a final investment decision by the end of this year. Slides accompanying Gentle's presentation Sept. 4 did not address FID timing. A spokeswoman, however, said in an email that the developer was still targeting a decision in this year.

"We know our customers for phase one at this point, and we are finishing documentation with them to reach a positive FID," Gentle said. "We'll see where we get to in the next couple of months."

Gentle did not name the other partners Tellurian has identified besides Total, though India's Petronet LNG Ltd. is among the companies that has been said to be exploring the possibility of making an equity investment in Driftwood.

Asked by an analyst about a perceived disconnect between what some investors think about the likelihood of the project going forward and Tellurian's stated confidence, Gentle said the developer has worked hard to de-risk the project to secure partners. "The inevitability of that project getting to FID is growing every day," she said.

In July, Tellurian finalized an agreement with Total that calls for the French company to make a $500 million equity investment in the holding company that includes Driftwood and four pipelines that Tellurian has proposed to build, in exchange for the right to lift 1 million tonnes per year from the export terminal for the life of the Louisiana facility. Tellurian has also been working with other potential partners to secure similar equity investments.

At full development, about half of Driftwood's 27.6 million tonnes per year capacity is expected to be used by equity investment partners that Tellurian has been soliciting. The remaining capacity is to be retained by Tellurian to market on its own.

Besides the equity commitment, Total has also agreed to buy 1.5 million tonnes per year of offtake from Tellurian's marketing volumes, indexed to Platts JKM, the benchmark price for spot-traded LNG in Northeast Asia. Commodity trader Vitol Inc. has a preliminary 15-year deal, also to be linked to JKM, to offtake 1.5 million tonnes per year of Tellurian marketing volumes.

Based on a July presentation, Tellurian would still need to sell equity partnerships covering 9 million tonnes per year to be able to support the construction of the first three of five plants proposed at Driftwood. An August presentation described the first phase as consisting of two plants. Each plant is to include four liquefaction trains and a total capacity of 5.5 million tonnes per year.

Harry Weber is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.