Agreements between Tellurian Inc & Total Ceased

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  • Tellurian Inc terminated a stock and LNG purchase agreement with France’s TotalEnergies SE (TTEF.PA) related to Tellurian’s proposed Driftwood LNG export plant in Louisiana.
  • Tellurian would likely have to choose between a business model that seeks partners or a model in which the company sells LNG to buyers like Vitol and Gunvor.

A Reuters news report states that Tellurian terminates Total agreement on Louisiana Driftwood LNG plant.

Why the Total agreements were terminated?

In the past, Tellurian wanted partners like TotalEnergies to invest in its Driftwood project, which will include a liquefaction plant, pipelines and natural gas production.

The partners were to receive LNG from the project. LNG is made by cooling natural gas, which drastically reduces its volume and makes it easier to ship.

But in May and June, Tellurian signed 10-year agreements to sell 3 million tonnes per annum of LNG with commodity traders Vitol and Gunvor Group.

“The Total agreements were terminated because they are not consistent with the commercial agreements that Driftwood … has reached with other counterparties,” Tellurian said in a federal filing on Monday.

Tellurian to choose a business model

Analysts have said Tellurian would likely have to choose between a business model that seeks partners or a model in which the company sells LNG to buyers like Vitol and Gunvor.
Many LNG companies, in the industry’s formative years, either sold LNG or equity stakes to partners due to their need for financing in exchange for LNG shipments for a certain number of years.

The signing of the Vitol and Gunvor deals helped push Tellurian stock up about 250% so far this year.

Tellurian stock in exchange for a cash purchase price

Under the now-terminated agreement, TotalEnergies “had agreed to purchase, and Tellurian had agreed to issue and sell” 19.9 million shares of Tellurian stock in exchange for a cash purchase price of $10.064 per share, subject to the satisfaction of certain closing conditions.

“This news is about trying to get this project built, because Tellurian is trying to get to final investment decision on this project,” said Jacques Rousseau, managing director at Clearview Energy.

“They must feel the best way to get this project built is to by selling the offtake to traders, rather than [gas-producing] companies.”

Tellurian’s making a final investment decision

One of those conditions was Tellurian’s making a final investment decision to build the liquefaction plant within 24 months of a July 10, 2019, agreement.

Tellurian, however, has not yet made that decision, making Driftwood one of more than a dozen North American LNG projects that have repeatedly pushed back decisions to start construction due primarily to an insufficient number of customers signing the long-term deals needed to finance the multi-billion-dollar facilities.

Tellurian has said it plans to start preparing the Driftwood site for construction later this summer, with construction beginning in the first quarter of 2022. read more

Tellurian shares were trading around $4.42 per share, up about 0.4%, on Monday afternoon.

Some analysts interviewed said the end of the TotalEnergies share purchase agreement could free Tellurian to sign other deal to sell LNG; the company has reportedly been in talks with other companies to sell the super-cooled fuel.

 

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Source: Reuters