An LNG supply agreement between Driftwood LNG LLC, a subsidiary of Tellurian Inc., and Gunvor Singapore Pte Ltd. has been terminated, according to an Aug. 1 filing by Tellurian to the US Securities and Exchange Commission.
The parties were unable to reach agreement on the commercial terms of an amendment to the agreement, the filing said.
In May 2021, Tellurian Inc. and Gunvor Singapore Pte. Ltd. signed a 10-year sales agreement for 3-million tonnes/year (tpy) of LNG indexed to a combination of the Japan Korea Marker (JKM) and the Dutch Title Transfer Facility (TTF), netted back for transportation charges. LNG was to be delivered free on board from Tellurian’s proposed 27.6-million tpy Driftwood LNG plant near Lake Charles, La.
At the time, Tellurian said the agreement would generate about $12 billion in revenue (OGJ Online, May 27, 2021).
The project’s viability has come into question as two of the three contracts the company signed in mid-2021 were cancelled last year (OGJ Online, Sept. 23, 2022).
The 11-million tpy, 2-plant Phase 1 portion of the project—estimated to reach development costs of $14.5 billion—is still progressing, Tellurian said in an August 2023 corporate presentation. Bechtel is continuing project work from 2022 under an extended limited notice to proceed and 45% of Phase 1 piles have been driven and all Plant 1 compressor foundations have been poured, according to the report.
In May, the company hired former investment banker Simon Oxley as chief financial officer. With the hire, the company is 'enhancing' project financing efforts, president and chief executive officer Octávio Simões said in the company's Aug. 7 earnings release.
On July 18, it entered a binding commitment letter with a fund of Blue Owl Real Estate Capital LLC regarding the sale and leaseback of about 800 acres owned and/or leased by Driftwood LNG LLC, to be used for the proposed liquefaction plant, according to a July SEC filing. The letter effectively replaced a previous letter of intent dated Apr. 4, 2023 (OGJ Online, Apr. 6, 2023). The binding commitment is worth $1 billion.
Tellurian generated about $32 million in revenues from natural gas sales in second-quarter 2023 compared with $61.3 million in the year-ago period, a change driven by decreased realized natural gas prices partially offset by increased production volumes, according to the Aug. release.
Natural gas production for the quarter was 17.2 bcf, an increase from the 9 bcf produced in second-quarter 2022.
Tellurian reported a net loss of about $59.6 million for second-quarter 2023, compared with a net loss of about $35,000 for second-quarter 2022.
Mikaila Adams | Managing Editor - News
Mikaila Adams has 20 years of experience as an editor, most of which has been centered on the oil and gas industry. She enjoyed 12 years focused on the business/finance side of the industry as an editor for Oil & Gas Journal's sister publication, Oil & Gas Financial Journal (OGFJ). After OGFJ ceased publication in 2017, she joined Oil & Gas Journal and was named Managing Editor - News in 2019. She holds a degree from Texas Tech University.