Tellurian delays pipeline construction in Driftwood LNG cost cutting

Tellurian Inc. will defer construction of three of the four pipelines proposed to supply its 27.6-million tonne/year (tpy) Driftwood LNG plant with natural gas as part of decision making regarding a Phase 1 final investment decision (FID). By doing so the company hopes to trim 30% off the project’s initial costs. Tellurian earlier this year delayed FID until 2021.  

Pipelines deferred include the 2-bcfd Permian Global Access pipeline (625 miles, 42-in. OD, Waha, Tex., to Lake Charles, La.) and 2-bcfd Haynesville Global Access pipeline (160 miles, 42-in. OD, Haynesville-Bossier shales to Lake Charles), according to the company’s Aug. 12, 2020, investor presentation. Tellurian said the only pipeline proceeding will be the 4-bcfd Driftwood pipeline (74 miles, 48-in. OD, 11 miles, 42-in. OD, 11 miles, 36-in. OD), connecting the plant with gas from various transmission systems. It did not mention the status of its 2-bcfd Delhi Connector (180 miles, 42-in. OD).

Tellurian now expects Phase 1 (14.4 million tpy) to cost $1,042/tonne instead of $1,473/tonne. In its business model the company projects FOB US Gulf Coast LNG costs <$3.50/MMbtu and has invited partners to participate on a cost-plus basis. The $3.50 figure combines gas sourcing costs of $2.00/MMbtu, plant and pipeline costs of $0.75/MMbtu, and debt servicing of $0.75/MMbtu.

The company described LNG demand from China and India as resilient, noting 8% and 21% increases, respectively, year-on-year through July 2020.