Market Realities, Covid Catch up to Tellurian

US LNG developer Tellurian said March 2 it will slow corporate spending and reorganise financing for a 2019 term loan as it “prepares for uncertain market conditions.”

“Given current global financial market conditions and increasing restrictions on travel caused by the onset of coronavirus, we are taking the steps necessary to focus on preserving the value we have created at Tellurian and Driftwood LNG,” Tellurian CEO Meg Gentle said. “To this end we will reduce our corporate overhead to approximately $6mn per month and have initiated discussions with our lender to extend the maturity of our 2019 term loan due in May 2020.”

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Tellurian’s business model continues to rely on access to low-cost US natural gas and a “premier” location on the Gulf Coast for the Driftwood liquefaction facility that can be built for $560/mt of capacity. Those two factors give Tellurian the opportunity to load LNG on the water at between $3 and $4/mn Btu, Gentle said.

In September 2019, Tellurian and Petronet LNG signed a memorandum of understanding (MOU) to negotiate the supply of up to 5mn mt/yr of LNG from Driftwood. The two sides met recently in India to try and firm up a deal that would also see Petronet take an equity stake in Driftwood.

“We have just returned from a visit to India where we continued discussions with Petronet and agreed to extend our MOU to May 31, 2020,” Gentle said. “We continue to see very strong growth in LNG demand from Asia in general, and India in particular, in spite of world conditions. We are highly confident that when travel restrictions are eased, we will be able to finalise several negotiations to complement the Petronet agreement and allow us to reach final investment decision (FID).”

In October last year, Tellurian chairman Charif Souki told NGW on the sidelines of the Oil & Money conference in London that he expected FID on Driftwood would be taken in early 2020.