The current gas price in India is $3.23 per million British thermal units (mmBtu) but the ceiling for gas from difficult fields is $8.43 per unit.
“We can produce gas in Haynesville (Louisiana) at $2/mmbtu and it will land in India at around $6/mmbtu or less,” Tarek Souki, senior vice president for LNG, told ET.
French LNG supplier Total, which is buying equity in Adani Gas, has also invested in Tellurian, giving the energy major a stake in a major supplier and a rapidly growing customer base of natural gas in India.
Tellurian is developing a portfolio of natural gas production, LNG trading, and infrastructure that includes an LNG export facility and an associated pipeline. It recently signed an MoU with India’s Petronet LNG for sale of 5 million tonnes a year of LNG. The companies aim to finalise the contract by March after due diligence.
Petronet’s MoU with Tellurian also envisages an 18% stake in the Driftwood project for a reported $2.5 billion.
Petronet’s shares fell sharply after the announcement, while Tellurian’s shares soared last month. Souki said LNG landing in India below $6 from a project that has a life of 40 years was a strong value proposition.
“Petronet will be our partner. So, I don’t know what else we can do to derisk some of the issues that Indian markets have with price volatility,” Souki said. He said his company’s LNG supplies would be based on cost of production and would not be volatile like other suppliers who link the price of gas to international benchmarks. “The value proposition in the US for bringing LNG anywhere around the world is going to be the most competitive.”
India’s biggest LNG supplier is Qatar, which has been shipping the super-cooled fuel to India for many years. Souki said his company’s cargoes will land at a more competitive and stable price despite the longer distance. “In the Qatar contract, you are exposed to Brent volatility in addition to the JKM (Japan/Korea Marker) market prices,” he said.
Asked how Tellurium would supply cheaper gas, Souki said shipping was only a part of the total cost of LNG and the landed price would still be competitive. “Our cost of production would be around $2/mmbtu, before all of our costs to get it on the water, which is another $2/mmbtu including our debt financing, and then the shipping cost from the US would be somewhere between $1.50-$1.75 depending on going to west coast or east coast of India.”
Further, shipping costs need not be very high, he said. “You can optimise some shipping. You can swap cargoes with different parts of the market.”
Driftwood is among a dozen planned US LNG export projects, which analysts said will produce 150 million tonnes a year of LNG, making the US the world’s largest exporter of natural gas.
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