Market Looks Saturated Just as Tellurian Gets Equipment Deal for Driftwood LNG

---

September 7, 2023--Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--With plans to start production by 2027, Tellurian (Houston, Texas) announced it secured a supply agreement from Baker Hughes (Houston) to get the infrastructure that would support the planned Driftwood LNG facility.

For undisclosed terms, Baker will supply eight gas turbines, compressors and other infrastructure that supports Tellurian's plans to bring Driftwood online in less than five years. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Production project and plant databases can click here for a list of detailed reports for Driftwood LNG-related projects and click here for the related plant profile.

Engineering firm Bechtel Corporation (Reston, Virginia) has already completed the foundations for the compressors.

"This agreement with Baker Hughes firms up our plans to secure the critical technology for Driftwood Phase 1," said Tellurian President and Chief Executive Officer Octavio Simoes.

Tellurian by March last year had the permits necessary for the start of construction at the $15.5 billion facility planned for Lake Charles, Louisiana. Phase 1 of the facility will be able to export as much as 1.5 billion cubic feet of LNG per day (Bcf/d).

The U.S. Energy Information Administration expects LNG exports to average 13.3 Bcf/d next year, a 12% increase from 2022 levels. It wasn't an easy start, however. Buckling under the strains of the pandemic, Tellurian in 2020 laid off 40% of its workforce and briefly delayed the final investment decision (FID) for Driftwood.

But with the renewed focus on LNG as an alternative to Russian supplies, Industrial Info said at its mid-year conference that it expects to see $53.5 billion globally in FIDs for LNG, close to pre-pandemic, 2019 levels, of $62.5 billion.

LNG, meanwhile, is at the top of the agenda at the annual Gastech conference in Singapore, with deals and handshakes coming from the sidelines and the periphery. With Canada finally looking to break out of the North American market with oil and gas, British energy company BP plc (NYSE:BP) (London, England) secured a long-term offtake agreement to secure supplies from the Woodfibre LNG facility in British Columbia.

Shell Plc (NYSE:SHEL) (London) executives added from Singapore that more investments were needed in the LNG market as demand remains resilient.

LNG "saved the day," said Li Yalan, the president of the International Gas Union, by keeping supplies adequate and supporting global energy security. The Institute for Energy Economics and Financial Analysis, however, is less sanguine, with facilities coming onstream after 2025 facing something of a slump in demand as the market balances out.

And despite its urge for investments, executives may agree. Shell said that, while prices are down from the record levels seen last year, they're still high enough to create some headwinds for demand.

In the U.S. economy alone, energy can be a main driver of consumer-level inflation and, while easing, a tight oil market in particular could create headwinds not only for everyday taxpayers, but for the investors that are needed to back Shell's view on investments.

The LNG market may be headed to a glut, though the scarcities and concerns from the early stages of the early stages of the war show it may be better to have too much than not enough, even if that curbs the revenue streams supporting the broader industry.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).