Tellurian Inc (NASDAQ: TELL) has provided details regarding its latest decision to terminate the deal with the Louisiana Driftwood LNG plant.
The decision to terminate the deal
The company says that it has considered partners like TotalEnergies as worthy collaborators in the past when it comes to investing in its Driftwood project. As a result, it planned to establish a project that would include natural gas production, pipelines, and a liquefaction plant.
The deal entailed serving partners with LNG from the project. The company describes LNG as a substance developed by cooling natural gas, an undertaking that causes it to reduce significantly in volume. As a result, it becomes easier to ship, and that is the goal.
Back in May, Tellurian moved into a 10-year deal where it sold 3 million tonnes per annum of LNG with commodity traders Gunvor Group and Vitol.
Tellurian discloses that there wasn’t any other option aside from the inevitable termination of the total agreements. It realized that most of those agreements had not been consistent with the commercial agreements that Driftwood had arrived at with the rest of the counterparties.
It was tough deciding on the way forward
Analysts continue to speak out on the matter, and they seem to have diverse opinions. A section of them believes that Tellurian might be in a dilemma in choosing what it wants between a model in which the company sells LNG to buyers like Gunvor and Vitol or a business model looking for partnerships.
Most of the LNG companies over the formative years in the industry were guided by their great need for finances in exchange for LNG shipments for a particular amount of time. As a result, most of them had to choose between selling out their equity stakes or LNG to partners to get the funding they needed badly.
The managing director at Clearview Energy, Jacques Rousseau, opined, “This news is about trying to get this project built, because Tellurian is trying to get to final investment decision on this project. They must feel the best way to get this project built is to by selling the offtake to traders, rather than companies.”