Woodside's Tellurian acquisition positions the company as one of the largest global LNG suppliers by volume
Addressing Woodside's acquisition of Tellurian and its U.S. Gulf Coast Driftwood LNG project, Daniel Toleman, Research Director for Global LNG at Wood Mackenzie, said, “The acquisition, valued at $1.2 B, presents Woodside with a valuable opportunity to strengthen its position in the Atlantic Basin LNG market. By incorporating the first phase of the Driftwood LNG project, which consists of an 11-metric MMtpy liquefaction capacity into Woodside’s existing 20 MMtpy portfolio, Woodside will emerge as one of the largest global LNG suppliers by volume.”
Effective liquefaction capacity, MMtpy
The strategic significance of this acquisition is underscored by Woodside's decision to take full operational control of the Driftwood LNG project. “This is the first time a major portfolio player has assumed full strategic control of a U.S. project. We have seen companies take strategic, non-operated positions in the past, but this move indicates that Woodside wants to determine its own future by taking control of one of the best-remaining LNG development sites on the Gulf Coast,” added Toleman.
The Driftwood LNG export facility has already secured approval from the Federal Energy Regulatory Commission (FERC) and a non-Free Trade Agreement (non-FTA). Woodside is well-positioned to utilize its extensive LNG operations and marketing experience, which will enhance the project's credibility and set the stage for securing high-quality partners.
Woodside's intention to involve partners in the Driftwood LNG development reflects a strategic risk-sharing approach that spreads capital risk and supports marketing efforts. The company's successful track record of involving partners in developments, as demonstrated by its previous experience with the Scarborough project, further bodes well for the Driftwood LNG project's prospects.
Toleman states that the acquisition will enhance Woodside's presence in the growing U.S. LNG market, attracting interest from major international investors. Additionally, the Driftwood LNG project is unaffected by the Biden Administration pause and offers cost-competitive advantages, along with an engineering, procurement, and construction (EPC) contract with Bechtel.
Located near Lake Charles, Louisiana, the Driftwood LNG facility is strategically positioned to access feedgas from major gas basins, including the Haynesville and Eagle Ford.
Added Toleman, “Looking ahead, Woodside's next steps for the Driftwood LNG project involve addressing the necessary conditions precedent, issuing a full notice to proceed under the EPC contract, and engaging potential partners.” The company also aims to secure an extension of time for its non-FTA export approval, signalling its confidence in the project's future progress.
“While several US LNG projects are currently navigating challenges in light of the Biden administration's pause, the Driftwood LNG project's favourable position may propel it ahead in the pre-FID (final investment decision) queue, reinforcing Woodside's strategic foresight in navigating the evolving dynamics of the LNG market,” said Toleman.
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