Driftwood LNG seeks US export licenses

OREANDA-NEWS. October 17, 2016. The Driftwood LNG export project along the US Gulf coast has applied to the US Department of Energy for authorization to export up to 26mn t/yr, which Driftwood said is equivalent to 4.1 Bcf/d (116mn m?/d) of gas.

Under conversion rates used by most other US LNG projects, that amount of LNG would be equivalent to about 3.3-3.6 Bcf/d of gas. According to Driftwood's web site, the proposed 96-mile (154km) feed gas pipeline would deliver an average of 4 Bcf/d to the planned terminal near Carlyss, Louisiana, but some of that gas would be lost in the liquefaction process rather than be exported. Driftwood did not return an Argus call seeking clarification.

Driftwood is seeking a 30-year license to export to countries that have free trade agreements (FTAs) with the US and a 20-year authorization to export to nations that do not have such agreements. The DOE has already issued pending approval for the FTA request, as such exports are presumed to be in the national interest.

The agency will only review the non-FTA application if Driftwood gets environmental approval from the US Federal Energy Regulatory Commission (FERC), a process that can cost up to \\$150mn for complex LNG projects. Non-FTA licenses are crucial to US projects, as most of the world's major LNG importing countries, including Japan, do not have FTAs with the US.

Driftwood plans to start construction in the second quarter of 2018 and begin exporting in the second quarter of 2022. Full output would be reached by the second quarter of 2025. The project is in FERC's pre-filing phase, which is designed to identify major stakeholders and permitting issues before a formal application is filed for construction authorization.

Driftwood is owned by Tellurian Investments, which was founded this year by former Cheneire Energy chief executive Charif Souki and former BG Group chief operating officer Martin Houston. The project also has hired other former high-ranking executives at Cheniere. Cheniere started exporting LNG this year from its Sabine Pass facility in Louisiana and is building another LNG export project in Corpus Christi, Texas.

Tellurian has announced a merger scheduled to close in the fourth quarter with publicly traded Magellan Petroleum. Denver-based Magellan earlier this week said it is considering selling stocks totaling as much as \\$500mn to raise funds for the merged entity, which would mostly focus on the LNG project.