Petronet contemplates a scaled-down deal with Tellurian

(Courtesy Petronet)

Petronet LNG Ltd’s proposed $2.5 billion investment plan in Tellurian’s upcoming Driftwood LNG terminal in Louisiana may be scaled down.

As Telangana Today reports, the decision comes as the entity is considering the energy company’s decision to cut first phase cost of the project by a third thereby also reducing production.

The newspaper reports that Petronet, a joint venture between government of India and the country’s leading oil and natural gas industry players to import LNG and set up LNG terminals in the country, has till December to reach final agreement with a Tellurian and conclude the investment plan.

At issue is Petronet’s ability to secure a sufficient quantity of LNG at competitive pricing. It is expected that PLL might renegotiate the whole investment deal given the current market conditions.

In September last year a non-binding memorandum of understanding was signed between PLL and Tellurian that gave the Indian entity PLL option to buy 5 million tonne per annum (mtpa) LNG from Tellurian’s Driftwood project on the banks of the Calcasieu River. In return, Petronet was to also spend $2.5 billion for an 18 per cent equity stake in the $28 billion Driftwood LNG terminal.

However, spot LNG prices have now crashed to about $2 per million British thermal unit  and LNG is widely available in the market. It would now make little sense to sign an agreement committing to pay on sea price of $3.5 to $4.5 per mmBtu for 40 years for the gas at this juncture, an energy analyst told Telangana Today.

The term of last year’s agreement between PLL and Tellurian expired on March 31 and then extended to May 31. The term has now been extended till December 31.

Telangana Today has the full story.