Page 5 - NorthAmOil Week 39 2022

NorthAmOil COMMENTARY NorthAmOil

based on global gas prices, whereas other LNG by saying that the termination of the two SPAs
producers typically rely on fixed-fee contracts, would give its gas portfolio additional flexibility.
did not appear to instil much confidence in In a September 27 statement, the company said
potential investors. it had updated its financing strategy for Drift-
Tellurian had previously talked up the flex- wood to prioritise lining up equity partners.
ibility it could offer to LNG buyers, but in this This is reminiscent of the company’s initial
instance, structuring its SPAs differently from strategy for the terminal, which also involved
other Gulf Coast producers did not pay off. The equity partners. However, that initial effort had
SPAs signed last year allowed for cancellation in also proved ill-fated, with France’s TotalEnergies
the event that full financing for the first phase of initially agreeing to invest $700mn in Driftwood
Driftwood had not been obtained by the end of before terminating its agreement owing to a The company said
July 2022. While Shell was reported to have can- missed deadline for sanctioning the project.
celled its 3mn tpy SPA, Tellurian sent a termi- Tellurian’s executive chairman, Charif Souki, it had updated its
nation notice to Vitol itself for its separate 3mn did concede prior to the news that two SPAs had financing strategy
tpy agreement. The status of one further SPA been terminated that the scrapped bond offer-
signed last year, with commodity trader Gun- ing would affect the company’s financial ability for Driftwood
vor, is unclear but there has been no mention of to begin delivering LNG on its previous sched-
a cancellation, so it is thought to still be in place. ule. In the statement on the company’s updated to prioritise
strategy, Tellurian’s president and CEO, Octávio
What next? Simões, talked up its status as an existing gas lining up equity
The latest setbacks leave Tellurian still trying to producer whose output is anticipated to expand. partners.
figure out how to proceed with Driftwood’s con- The eventual completion of Driftwood now
struction after it looked like significant progress appears to be being portrayed as a development
was being made over the past year. that will eventually provide additional value
Indeed, the company had begun some initial and unlock expanded access to global mar-
construction at the Driftwood side despite not kets. Simões said the company would continue
having yet reached a final investment decision funding its construction plans with cash and
(FID). It is difficult to see, however, how the pro- operating cash flow. It appears, however, that
ject can advance further in the near term with- the company’s fortunes would need to change
out new investment. significantly in order to help further advance the
Tellurian has sought to emphasise the posi- project. And currently, it may not look like an
tives in the recent developments, for example attractive bet to investors.™

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