Tellurian Inc. is looking to join the wave of Gulf Coast LNG developers partnering with exploration and production (E&P) companies on tolling agreements to raise international exposure, executive chairman Martin Houston said Tuesday.
In a letter to shareholders, the Houston-based company's co-founder said Tellurian’s marketing team had spent last week meeting with potential customers and market stakeholders about its Driftwood liquefied natural gas project.
While the Department of Energy’s (DOE) recent directive to pause LNG authorizations have presented complications for developers, Houston said “there is ample demand” in the market for future U.S. LNG volumes.
“There is also interest from U.S. natural gas producers to get exposure to the international gas markets by tolling gas through Driftwood,” Houston said. “We are pursuing these discussions too.”
Plans for the 27 million metric tons/year (mmty) LNG export facility in Lake Charles, LA, were approved by FERC in 2019, and limited construction on the facility’s foundational infrastructure began in 2022. At the start of construction, Tellurian had secured agreements for 9 mmty of offtake with trading houses and Shell plc.
Tellurian is currently looking for new gas buyers and potential equity partners after its offtake agreements were terminated. In the past, it has pivoted between business models repeatedly, at times offering equity in the project or sales and purchase agreements (SPA) to underpin financing.
Tellurian’s discussions come at a time when E&Ps have increasingly forged direct tolling agreements with developing LNG projects or partnerships with trading houses to diversify their market exposure.
EQT Corp. has inked tentative agreements for at least 2.5 mmty in liquefaction capacity at the proposed Commonwealth LNG and Lake Charles LNG projects in Louisiana and Texas LNG in Brownsville. EQT’s direct LNG export exposure could account for around 4% of its total current production, according to NGI calculations.
Chesapeake Energy Corp. has also made plans with Gunvor Group Ltd. to supply feed gas for LNG at Lake Charles LNG and the proposed Delfin LNG project. Permian Basin-weighted independent Devon Energy Corp. previously signed a tentative agreement for up to 2 mmty of offtake capacity and an undisclosed future stake in Delfin.
However, aside from Texas LNG, all of the potential projects tapped by E&Ps and trading houses so far are either impacted by the DOE’s policy review or are awaiting an answer on an export authorization extension.
Houston said Tellurian’s team has emphasized that Driftwood is fully approved and price competitive, which the company hopes will give the project momentum for an accelerated final investment decision timeline. Management told investors earlier in the month that the firm was aiming for a final investment decision and the start of major construction on Driftwood’s first phase by the end of the year.
The project recently received a three-year extension from the Federal Energy Regulatory Commission and currently has DOE export authorization. However, it would need to reapply for a non-free trade agreement permit in May 2026.
“The overall tone in CERAWeek was bullish for natural gas and LNG,” Houston said. “My own view is that the transition pendulum continues to swing back in the industry’s favor – out of necessity. Of course, there are headwinds too, but we have a great project, and we intend to make sure it gets built.”
