Page 10 - NorthAmOil Week 09

NorthAmOil PROJECTS & COMPANIES NorthAmOil
Tellurian struggles with market conditions
LOUISIANA
WEAKENING LNG demand is weighing on US LNG developer Tellurian, with two pieces of unwelcome news for the company being announced in the past week.
First, Tellurian and India’s Petronet announced on February 27 that they were extending a memorandum of understanding (MoU) that had been signed in September 2019. Under the MoU, Petronet intends to negotiate the purchase of up to 5mn tonnes per year (tpy) of LNG from Tellurian’s proposed Driftwood terminal on the Louisiana Gulf Coast. The MoU also envisages Petronet buying an 18% equity stake in Driftwood LNG for $2.5bn.
While the MoU has only been extended by two months, to May 31, 2020 from March 31, 2020 previously, it was initially expected that a firm agreement would be announced during US President Donald Trump’s February visit to India.
Meanwhile, Bloomberg reported last week, citing sources familiar with the matter, that Petronet had started soliciting offers on terms similar to those tentatively agreed with Tellu- rian. This had left the US company “rattled”, the news service reported, adding that the situation illustrated the pressure on sellers of LNG amid a global glut of the fuel.
A managing partner at Webber Research & Advisory, Michael Webber, commented that combined with the lack of a definitive agree- ment, this added to doubts that Tellurian would be able to secure “a sizable anchor investment” in Driftwood LNG from Petronet. He added that it was possible that the two companies could reach a scaled-back deal, however.
The second piece of bad news came on March
2, when Tellurian announced that it would cut
spending in response to current market condi-
tions. The company will also seek to extend the
maturity date of a loan due in May 2020. This
comes as the glut of LNG in the global market
is being exacerbated by collapsing demand as
a result of the coronavirus outbreak, and spot
prices for the fuel falling to new lows. China –
one of the world’s leading importers of LNG –
has been hit hardest by the outbreak, and some
buyers in the country declared “force majeure”
on a number of LNG cargoes last month. The
impact has spilled over into other regions,
with buyers in Europe and other parts of Asia
having more LNG available to them than ever
before. Indeed, Spain’s Naturgy Energy Group
is reported to have cancelled at least one cargo that it would that it was due to buy from US-based Cheniere
Energy in April.
For Tellurian, current conditions make the
path towards a final investment decision (FID)
on Driftwood even more challenging, when it
was already not guaranteed. The company said
it was seeking to reduce its corporate overhead conditions. to about $6mn per month.
“Given current global financial market con- ditions and increasing restrictions on travel caused by the onset of coronavirus, we are tak- ing the steps necessary to focus on preserving the value we have created at Tellurian and Driftwood LNG,” Tellurian’s CEO, Meg Gentle, said. “We are highly confident that when travel restrictions are eased, we will be able to finalise several negotia- tions to complement the Petronet agreement and allow us to reach final investment decision.”™
Tellurian announced
cut spending in response to current market
P10
w w w . N E W S B A S E . c o m Week 09 05•March•2020