Page 12 - NorthAmOil Week 06

NorthAmOil PROJECTS & COMPANIES
NorthAmOil
Tellurian, Petronet
reportedly ready
to sign deal
US-INDIA
THE US’ Tellurian and India’s Petronet, the country’s leading gas importer, are reportedly preparing to sign a $2.5bn LNG deal later this month. Citing two sources familiar with the matter, Reuters reported that the deal was due to be signed during US President Donald Trump’s upcoming visit to India.
Tellurian is proposing to build the proposed 27.6mn tonne per year (tpy) Driftwood LNG terminal in Louisiana, on the US Gulf Coast, at an estimated cost of $27.5bn. The company has taken a different approach from some of its com- petitors to obtaining the financing necessary to proceed with Driftwood, and is offering equity participation in the project in addition to offtake agreements. This is the route its deal with Petr- onet will take, and it follows on from a non-bind- ing memorandum of understanding (MoU) that the two companies signed in September 2019, during a visit to the US by Indian Prime Minister Narendra Modi.
Under the MoU, the companies agreed on a preliminary basis that Petronet would pay $2.5bn for an 18% equity stake in Driftwood – including the terminal and the pipeline that will supply it. This level of equity would make it the largest outside participant in the project so far. Under the MoU, Petronet will also have the rights to negotiate the purchase of 5mn tpy of LNG from Driftwood. Tellurian’s CEO, Meg Gentle, said in September that the MoU also included a $5bn debt commitment.
“We will sign the document sometime in the first quarter and we will have financing ready to close simultaneously, and then we will begin construction,” Gentle told Bloomberg in September. “India is one of the fastest growth markets for LNG and should soon become the second-largest LNG importer.”
The deal is the largest agreed by an Indian company in the US LNG space, and comes as the Asian country is seeking to diversify its supply sources and bolster energy security.
Petronet’s investment into Driftwood is expected to be made over a five-year period, with supplies beginning in 2024. They will be gradu- ally ramped up to 5mn tpy by 2028, according to one of the Reuters sources.
The source added that the delivered price of gas to India would be below $6 per million British thermal units ($165.96 per 1,000 cubic metres). This would be around 30% cheaper than the LNG India receives under its existing long- term deal with Qatar.
The deal is the largest agreed by an Indian company in the US LNG space.
“India will be getting the producer-based prices, unlike other deals where Indian compa- nies are only one of the customers,” the source told Reuters.
It is notable that the news that Petronet and Tellurian are on the verge of signing a defini- tive agreement comes after Qatar turned down India’s request to renegotiate the terms of their LNG deal. India had been seeking more favour- able pricing given the collapse in prices for LNG, which has made buying on the spot market a more attractive proposition. However, Qatari Minister of Energy Saad Sherida al-Kaabi said his country would not renegotiate any existing contracts, though it was open to offering new volumes.
India’s existing contract with Qatar runs until 2028, and LNG from the Middle Eastern coun- try accounts for about 40% of overall Indian gas imports currently. However, India is aiming to increase the share of natural gas in its energy mix to 15% by 2030 from 6.5% today and will be seek- ing more LNG supplies in an effort to achieve this. Unless Qatar offers any new volumes at a lower price, it will be unsurprising if India looks elsewhere. Petronet’s upcoming deal with Tellu- rian appears to be an illustration of this.™
The news that Petronet and Tellurian are on the verge of signing a definitive agreement comes after Qatar turned down India’s request to renegotiate the terms of their LNG deal.
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w w w. N E W S B A S E . c o m Week 06
12•February•2020