Washington — Before agreeing to invest in Tellurian's Driftwood LNG export terminal in Louisiana, the CEO of French energy giant Total pushed the developer to build its own pipeline from the Permian Basin to reduce flaring and allow exporters to take advantage of low US natural gas prices.
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Total has a roughly 20% stake in Driftwood LNG, which aims to start exports in mid-2023. Tellurian is building the 625-mile Permian Global Access Pipeline to connect West Texas with the export terminal south of Lake Charles, Louisiana.
"The only request I had to them was: we want to have a pipeline between Driftwood and the Permian," Total CEO Patrick Pouyanne said Thursday at an Atlantic Council event in Washington.
Pouyanne said Permian oil producers "flare and flare and flare and flare, more and more."
The lack of natural gas pipeline capacity has made Waha prices shift into negative territory at times -- as oil producers are forced to either pay to offload their associated gas or get state permits to burn it through flaring.
"You'll have natural gas for a low price, that is quite clear," he said of the pipeline constraints.
As part of its deal with Tellurian, Total agreed to a $500 million equity investment that gives it the right to lift 1 million mt/year from Driftwood LNG for the life of the project. It also agreed to buy 1.5 million mt/year from Tellurian's marketing unit under a long-term deal, based on Platts JKM, the benchmark price for spot-traded LNG in Northeast Asia.
"Clearly Patrick and Total were the first to see what others around the world now recognize, Tellurian's unique advantage physically connecting our LNG facility to the US' lowest-cost gas, in the Permian," said Amos Hochstein, Tellurian's senior vice president. "This will result in the cheapest LNG out of the US."
SPREADING OUT GEOPOLITICAL RISK
Total is also a major investor in Sempra Energy's Cameron LNG project in Hackberry, Louisiana, which started production this week and hosted a visit by President Donald Trump.
Pouyanne said Total saw the US LNG industry as an obvious investment.
"You have a huge gas resource for decades -- low cost, [and] low price, probably," he said.
The Trump administration's trade dispute with China has complicated the outlook for US LNG exports, he said, although it reinforces Total's strategy of spreading geopolitical risk across many countries.
"The US seems to be nice except if they begin to have trade wars with some customers, and then it's less nice," Pouyanne said.
Total has LNG operations across the globe, including Australia, Papua New Guinea and Qatar. In Russia's far north, it holds a 20% stake in the 16.5 million mt/year Yamal LNG facility.
"Everyone was thinking that we were just crazy to try to produce LNG 600 km north of the Arctic Circle in the middle of nowhere," he said. "It was a little crazy, to be honest. But we've done it."
Pouyanne said all Yamal LNG trains have been launched on schedule and under budget, producing gas for less than $1/MMBtu.
On European energy security, Pouyanne took issue with US opposition to Russia's Nord Stream 2 gas pipeline expansion to Germany. US lawmakers have long opposed the project, arguing it makes Europe too reliant on Russian energy.
Pouyanne said Nord Stream 2 and access to US LNG imports are both in Europe's energy security interests as they diversify supply. He said Europe does not need all of the US LNG import capacity that has already been built, but access to US gas creates competition that will keep European gas prices low.
"This is a cap on the Russian gas price, that's all," he said. "It's also obvious that the Russian gas is less expensive than US LNG. As a US LNG investor, I don't want to send my gas to Europe, I want to send my gas to China, which is paying more than Europe."
SNAGGING ANADARKO ASSETS
Pouyanne shared new details on Total's role in the recent bidding war between Occidental Petroleum and Chevron to acquire Anadarko Petroleum. Total agreed to buy Anadarko's assets in Algeria, Ghana, Mozambique and South Africa for $8.8 billion, which allowed Occidental to sweeten its bid.
Pouyanne said he had been thinking about possibly acquiring the assets for more than a year and held some talks with Anadarko. He saw the assets "fitting exactly and perfectly" with Total's broader strategy.
He said it didn't take "a lot of creativity" to seize the opportunity when Occidental aggressively sought to outbid Chevron.
"It's just a matter of sending an email to my colleague, and then I was bringing one part of the solution for her to win," he said, referring to Occidental CEO Vicki Hollub. "Total is just benefiting from the determination of Oxy. I thank Vicki to have done it."
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