Woodside Energy, which agreed to purchase Tellurian Inc. in July, intends to maintain at least 50% interest in the Driftwood LNG project, CEO Meg O'Neill said during the Gastech 2024 conference in Houston.
"I think we'd like to keep 50% as a floor, but again, the exact structure might vary a bit," O'Neill said during a briefing with the media. "That's why we don't want to be too deterministic because again, it'll come down to what sort of stake the [potential partners] want, what kinds of capabilities they bring to the table."
O'Neill said a pause enacted by the Biden administration on new U.S. LNG export approvals announced in early 2024 gave Woodside, and Driftwood, a slight head-start over other projects. But for the overall industry, she questioned the reputational risk for the U.S.
"From an industry perspective, it's in my mind not constructive because it creates a question of, is the U.S. a stable place to invest or not? Obviously, we think it is, we're backing it with our Tellurian investment and our OCI clean ammonia project acquisition, but it does create a bit of uncertainty and something that we'll just need to continue to navigate over time."
O'Neill said Australia's Woodside was well represented around the globe to talk to potential partners and customers about coming into Driftwood either through equity investments, offtake agreements or gas supply.
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O'Neill said Woodside was different from many of the U.S. LNG players due to its balance sheet and ability to take the LNG into its own portfolio.
"We're not focused on LNG offtake agreements. We're much more focused on getting the right equity partners and bringing the 'Dream Team' together," O'Neill said.
O'Neill said Tellurian shareholders would vote on the Woodside deal on Oct. 3, labelling the vote as "a critical milestone that has to be achieved."
"We need to get a successful vote from their shareholders. Everything's looking promising. We also need a couple of regulatory approvals for Woodside to take over the company, but we expect that those will be forthcoming within a matter of weeks," O'Neill said.
Woodside announced its plan to acquire Tellurian, which was struggling to develop its 27-million tonnes per annum (mtpa) Driftwood LNG project, for $900 million, or a cash offer of $1 per share. The implied enterprise value of the deal is $1.2 billion.
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Woodside expects to take an initial final investment decision (FID) regarding Driftwood sometime in the first part of 2025. O'Neill said some civil work has been done on the site to lessen the risk, while she said Woodside continues to work with Bechtel to reprice the contract for the first couple of phases of the Driftwood development.
Driftwood doesn't have any sales contracts in place so Woodside isn't burdened by offtake commitments to third parties or supply commitments to other third parties, O'Neill said. In July, Aethon closed a deal to buy Tellurian's Haynesville Shale assets. The deal included a non-binding heads of agreement for 2 metric tons per year of LNG from the Driftwood project.
Located in Louisiana, Driftwood LNG is fully permitted with both a valid non-Free Trade Agreement (non-FTA) LNG export authorization from the U.S. Department of Energy, and a Federal Energy Regulatory Commission (FERC) authorization, which was recently approved for an extension.
"One of the things we really like about Driftwood is the fact that we have our non-FTA permit in place and part of why we're working towards starting the project early next year is to make sure we're able to produce LNG within that window," O'Neill said.
In a July 22 press conference, Woodside's International COO Daniel Kalms said that Driftwood has FERC approval until the second quarter of 2029.
"So, our intention would be to get everything rolling to try to meet the expectations of the current permits, and we believe we've got the ability to do that."
O'Neill also Driftwood would opened the door to a variety of contracting structures that would allow Woodside to sell on an oil index, the Title Transfer Facility or the Japan Korea Marker.
Perth-based Woodside has a diversified, large-scale, low-risk portfolio with operations in Australia, Canada, the U.S. Gulf of Mexico (projects including Shenzi, Mad Dog and Atlantis), Mexico, Senegal, Timor-Leste and Trinidad and Tobago. In the piped-gas and LNG spaces, Woodside is focused on leveraging infrastructure to monetize undeveloped gas, including optionality for hydrogen.
Woodside's purchase of Tellurian has the potential to convert Woodside into a global LNG powerhouse. In the LNG space, O'Neill said her company added value in a number of places.
"One, we've got an advantage versus other developers in our financial strength and our ability to progress the project without project financing. Secondly, we see ourselves as having advantage to operating capabilities: the ability to debottleneck and operate the plans reliably. Third, we see value in marketing and getting the molecules to the end customers," O'Neill said.
O'Neill said Woodside would likely maintain a significant portion of the LNG for its equity stake in its own portfolio and look to place it with end customers as opposed to offering the LNG free-on-board to a third party who then gets the opportunity to make all the upside from the end customers. "So, we want the ability to access those end markets," O'Neill said.
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With regards to a second Driftwood LNG site, which could allow for an additional 30 million tonnes per annum in the future, subject to obtaining necessary permits and export authorization, O'Neill said Woodside would likely keep the site for its own use.
"Maybe the key reason is it's not obvious which product will be the product we'll want to export but as we think about the energy transition and you ask yourself, 'well what are the energy products that are likely going to be valuable in a world that has a high price on carbon emissions?' We think blue ammonia is very attractive. So, the second site, it's not obvious to me if that's going to be an LNG site or a blue ammonia site," O'Neill said.