Charif Souki, chairman of Houston energy developer Tellurian, says “the dominos are starting to fall into place” to complete the financing of the firm's $13.6-billion Driftwood LNG export terminal being built on the Gulf of Mexico in Louisiana after it sold part of the 1,200-acre project to an unnamed U.S. investor for $1 billion.
“It is a very creative financial transaction,” Souki said, in which the company will lease back 800 acres for 40 years. “It was a very, very affordable and creative proposal by the group,” a New York-based organization that Souki said has about $120 billion in assets under management but that he would not name.
The site has a total of about 1,200 acres, with a portion purchased by Tellurian and other acreage leased locally. The company paid about $300 million to purchase the 800 acres, which Souki said has the added value of year-long site upgrading by Bechtel, the export terminal EPC contractor.
Bechtel cleared about 550 acres of the site, enough for construction of the first of two LNG processing plants in the project's first phase. About 7,000 reinforced concrete pilings have been installed to strengthen ground along the channel that leads to the Calcasieu River, Souki said. The site is near Lake Charles, La.
The site will require 20,000 pilings for the two plants in phase 1 that will have an annual export capacity of about 11 million tons of LNG. Construction began in April 2022 and has about 250 workers now, which will peak at about 5,000.
The site is now “de-risked,” and construction can be accelerated, said Samin Makherjee, senior vice president of Driftwook Assets and former COO of McDermott International. The civil and geotechnical design are complete and confirmed and long-term equipment purchases are next.
Baker Hughes has the contract for electric-driven zero-emission pipeline compressors. The project's US Energy Dept. and Federal Energy Regulatory Commission permits are secured.
Engineering is about 30% complete and the site is prepared for construction sequencing, Makherjee said.
Along with the $1 billion from the unnamed investor, Tellurian has also invested $1 billion. The company expects to have about $7 billion in financing from banks and another $3 billion to $4 billion in equity investments “from our own resources or counterparties,” Souki said.
Company CEO Octavio Simoes told Nikkei Asia that it is in talks with Japanese and Indian companies about potential investments.
The project had a setback last September when Shell backed out of deals to buy LNG from Driftwood and Tellurian ended its agreement with Dutch commodities trader Vitol. It still has an agreement with Swiss-based natural gas trader Gunvor.
Tellurian said at the time that the cancellation of the agreements was the result of circumstances in the market, which made staying on the construction schedule more difficult, but it was looking for equity partners.
Construction is expected to take 48 months. Tellurian said it plans more site work that would “significantly advance piling, pouring foundations, construction of marine offloading facilities, and other work throughout 2023.” Simoes said the firm would finance continued construction with operating cash flow.
Tellurian is a natural gas producer with another 11 natural gas wells in development. It was founded in 2016 by Souki and Martin Houston, who originated the concept of LNG destination flexibility, ensuring that LNG became a commodity, the company said