Tellurian Inc. on Wednesday gained a lifeline for its stalled Driftwood LNG project in Louisiana after Aethon Energy Management LLC agreed to buy the Haynesville Shale portfolio and become a stakeholder in the still-unsanctioned Gulf Coast export facility.
In a heads of agreement (HOA), the companies negotiated a 20-year offtake agreement for 2 million metric tons/year (mmty) of liquefied natural gas indexed to Henry Hub plus a liquefaction fee. The 27 mmty Driftwood project in Lake Charles, LA, was approved by the Federal Energy Regulatory Commission in 2019.
Houston-based Tellurian will have the support of “a vital partner” and “take us several steps closer to developing the Driftwood LNG project,” Executive Chairman Martin Houston said.
The HOA provides “appropriate credit support” and “the basis for project financing,” he added. As well, “Aethon will continue to explore additional opportunities to bring value to Driftwood LNG following the transaction.”
Dallas-based Aethon also agreed to pay Tellurian around $260 million for its Haynesville portfolio to expand its gas-rich asset base in Louisiana.
In March, Houston had said in a letter to shareholders that Tellurian was looking to partner with exploration and production companies on tolling agreements to raise international exposure.
Tellurian in 2017 paid $85 million to purchase upstream assets in the northern Louisiana portion of the Haynesville. Included in the initial transaction were 9,200 net acres, with 138 operated Haynesville and Bossier sand drilling locations. Tellurian at the time estimated the total resource potential at 1.3 Tcf.
Aethon said its footprint in the Haynesville and Bossier formations would expand by about 31,000 net acres with the Tellurian transaction. Pro forma gathering and transportation capacity in Louisiana would be 3 Bcf/d-plus.
In 2020, Aethon teamed up with Black Stone Minerals LP to restart some activity in Angelina County, within the East Texas portion of the Hayneville. Earlier this year, though, Aethon curtailed gas development in East Texas because of low prices.
The Tellurian transaction, set to be completed in June, “provides complementary growth opportunities alongside our extensive upstream and midstream footprint in the Haynesville with more than 20 years of existing inventory life,” Aethon CEO Albert Huddleston said. “Our partnership with Tellurian will provide our downstream LNG customers with the lowest methane emission intensity in North America.”
