SHREVEPORT, La.—The global LNG market is growing and “it’s growing very rapidly,” said John Howie, senior vice president of upstream for Tellurian Inc. (NASDAQ: TELL), during the inaugural DUG Haynesville conference and exhibition in February.
Natural gas, he said, is “going to displace coal as we industrialize and commercialize the third world and as the population simply grows.”
With very attractive economics, the U.S. is best positioned to deliver this gas, Howie said. “We’ve got the infrastructure, we’ve got the Haynesville and we’ve got a business model designed to align our customers and our investors.”
Tellurian’s business model includes construction of the $15.2 billion Driftwood LNG terminal near Lake Charles on the Calcasieu River, a pipeline network and upstream assets in the Haynesville Shale. “Tellurian is a massive long bet on global growth,” he said.
The aggregated system is going to deliver up to 4 billion cubic feet per day (Bcf/d) of gas to global markets. Tellurian’s marketing arm will help sell the LNG. “What we’re trying to do is reintegrate our value chain. So we’re putting together the pieces; we feel like it’s absolutely the most economical solution for our customers and for our investors,” Howie said.
The terminal has the capacity of 27.6 million tons per year. “That’s 4 Bcf of gas a day. If you do the math … that is 40 Tcf of natural gas resource over the life for this plan.” Tellurian currently produces .004 Bcf/d. “I’ve got a chart that I have next to my desk to remind myself of where we are and where we want to go. That’s very ambitious.”
The start of the chain in building Tellurian into a global natural gas company is gas production from the U.S., he said. That includes Tellurian Production Co., the upstream portion of the Tellurian model, which is “absolutely critical” to the company’s business model, he said.
In fourth-quarter 2017, Tellurian acquired 11,629 net acres in the Haynesville Shale primarily in DeSoto and Red River parishes, La., from Rockcliff Energy LLC for $87.8 million.
The assets include about 4 MMcf/d of gas production, about 1.4 Tcf of gas resource and about 178 identified development locations and 19 operated producing wells. The assets are also 80% HBP and 94% operated, allowing flexible development for the company. Tellurian believes it will be able to produce and deliver gas to the market for an estimated $2.25/MMBtu.
He pointed out that companies like Chesapeake Energy Corp., Comstock, Goodrich and BP Plc have figured it out. “They have materially de-risk the Haynesville and it’s materially underdeveloped.” He noted there’s a trajectory and running room for Tellurian to be able to develop those assets.
“If you think about it, this is an ideal asset,” Howie said. “We want to operate to control the pace of development, we want to operate to control costs and we want to have low operating costs. This leads to an initial goal: 1.5 Bcf a day by 2022, 2023,” Howie said.
“Tellurian is a massive long bet on global growth,” he said. “There is no better natural gas asset and no better natural gas producers than those in the Haynesville. And we want to help you move your gas and sell it internationally.”
Brandy Fidler can be reached at email@example.com.
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