Tellurian Inks HOA With Total for Driftwood Project
US LNG developer Tellurian said April 2 it had signed a heads of agreement (HOA) with French Total for a $500mn equity investment in Tellurian’s Driftwood LNG project and Total’s purchase of 1mn mt/yr of LNG from Driftwood.
In addition, the HOA specifies that the two parties will enter into a sales and purchase agreement (SPA) covering another 1.5mn mt/yr of LNG from Tellurian Marketing’s share of offtake volumes from the Driftwood LNG export terminal. The SPA will be for the purchase of LNG free on board for a minimum term of 15 years at a price based on the Platts Japan Korea Marker (JKM).
In addition to the equity investment in Driftwood, Total has agreed to purchase 19.87mn common shares of Tellurian for $200mn, subject to certain closing conditions, in particular a positive final investment decision on the Driftwood project. Including its original $207mn investment in Tellurian in 2017, Total’s aggregate investment within the Tellurian portfolio will amount to $907mn.
The common stock purchase agreement specifies Tellurian Marketing will purchase equity in Driftwood, which Tellurian intends to fund with a private equity financing of Tellurian Marketing. That equity interest equtes to about 2mn mt/yr of LNG purchases, leaving Tellurian Marketing with about 13.6mn mt/yr of Driftwood’s total capacity of some 27.6mn mt/yr.
“Total is a premier global natural gas production and trading company and will manage a portfolio of 40mn mt/yr of LNG by 2020,” LNG CEO Meg Gentle said in a statement. “Our partnership with Total began before the inception of Tellurian, when Total endorsed a new business model for US LNG.”
Total CEO Patrick Pouyanne said Total’s investment in Driftwood reflects the falling costs to produce natural gas in the US and continuing innovation in applying technology to produce the fast resources of US shale gas.
“The Tellurian team has an established track record of developing and constructing energy infrastructure on time and at the lowest cost,” he said in a statement. “We look forward to joining the Driftwood partnership and continuing to invest in our LNG portfolio to provide flexible, reliable and low-cost LNG to our global customers.”