President Donald Trump and Indian Prime Minister Narendra Modi may unveil new economic partnerships between the two countries at a joint appearance in Houston this weekend, including potential Indian investment in a US Gulf coast LNG project.
Trump said in Washington, DC, yesterday that there "could be" an announcement on 22 September during an event at Houston's NRG Stadium expected to be attended by more than 50,000 people.
Trump said he will attend the event because "[Modi] asked, would I go, and I will go," Trump said. "I have a very good relationship with Prime Minister Modi."
The event, called "Howdy Modi," is being hosted by the Texas India Forum for the Indian prime minister.
In February, India's Petronet LNG signed a preliminary agreement with Houston-based LNG developer Tellurian to invest in the company in exchange for long-term LNG supplies from Tellurian's planned Driftwood LNG export terminal near Carlyss, Louisiana.
When asked if that deal could be advanced or finalized this weekend, Tellurian told Argus, "We will certainly confirm any deal when we have it."
Petronet is India's largest LNG importer but it does not have any long-term deals for US LNG. It has a long term deal for 8.5mn t/yr with Qatar's state-controlled Qatargas and a 1.44mn t/yr long-term deal with Australia's Gorgon LNG. Both those deals are indexed to oil prices, so Petronet may be seeking to diversify its procurement strategy with Henry Hub-indexed LNG.
Prices of spot LNG delivered to India were around $4.50/mn Btu in August, down considerably from August last year, although cargoes from Qatar and Australia delivered under long-term contracts cost more than $8/mn Btu.
Indian LNG imports climbed last month from a year earlier as domestic gas demand increased while gas output slowed. Imports were at 2.1mn t, equivalent to 88.3mn m³/d of dry gas. This was up from 80mn m³/d a year earlier and unchanged from July.
Higher LNG imports may help meet India's plans to launch a gas hub.
Tellurian, founded by former Cheniere Energy chief executive Charif Souki and former BG chief operating officer Martin Houston, is selling equity to help finance construction. For every $500mn of investment, Tellurian is offering 1mn t/yr of offtake, equivalent to about 127mn cf/d (1.3bn m³/yr) of gas, at production cost for the lifetime of the project.
Tellurian plans to acquire its own gas reserves to keep LNG production costs as low as possible, but it is also considering initially coming on line by buying feed gas from the US grid because of expected low costs for associated gas from the oil-rich Permian basin in west Texas and eastern New Mexico.
Tellurian has acquired 11,620 net acres in the Haynesville shale in Louisiana, with a total net resource of 1.4 Tcf, for $87.8mn.
Tellurian projects that equity holders could get LNG at free-on-board (fob) costs as low as $2.85/mmBtu, with Permian basin gas of $1/mmBtu, pipeline transportation costs of 35¢/mmBtu to southwestern Louisiana, liquefaction costs of 50¢/mmBtu and financing costs of $1/mmBtu.
Tellurian has proposed building its own pipelines to bring gas from the Permian, the Haynesville shale and the Perryville/Delhi hub in northeast Louisiana, which is a major transit point for gas from the Marcellus and Utica shale fields in Appalachia.
So far only France's Total has signed an equity deal in exchange for supply with Tellurian, agreeing to invest $500mn for 1mn t/yr of supply at production cost.
Total has agreed to invest an additional $407mn in the company, for a combined $907mn, for a 25pc stake in Tellurian.
Total and Swiss trading firm Vitol have also each signed 15-year deals to buy 1.5mn t/yr of LNG from Tellurian at prices indexed to Asian spot LNG prices minus undisclosed shipping costs.
The deals are contingent on Tellurian financing construction, which it plans to do this year. Exports would begin in 2023.
Driftwood would cost $15.2bn for the full 27.6mn t/yr of planned capacity, but it could come on line with a two-train first phase of 11mn t/yr, at a cost of $7.6bn, or a three-train first phase of 16.6mn t/yr, at cost of $10.3bn.
If Driftwood comes on line with 11mn t/yr of capacity, Tellurian plans to sell 8mn t/yr to equity partners for a total of $4bn, which would leave the firm with 3mn t/yr that it could market on its own. At full build-out, Tellurian would sell 60pc of production to equity partners, for a total investment of $8bn, which would leave Tellurian with 12mn t/yr that it could market on its own.
Currently, Indian gas utility Gail has 20-year contracts for a combined 5.8mn t/yr of US LNG, with 3.5mn t/yr of that from Cheniere Energy's Sabine Pass LNG terminal in Louisiana and 2.3mn t/yr from Dominion's Cove Point LNG facility in Maryland. Gail does not currently need all that supply and often issues tenders for its US LNG, as it can resell it without any restrictions.
