Australia’s Woodside to buy US LNG developer Tellurian

Australian independent Woodside Energy is buying US LNG developer Tellurian, which is behind the planned 11mn t/yr Driftwood phase 1 project on the US Gulf coast.

Woodside said the all-cash payment will position the firm as a global LNG powerhouse, with the purchase providing an "attractive entry" with more than $1bn spent on the Louisiana project to date. The deal values Tellurian at $1 a share with an implied value of $1.2bn.

Driftwood's development plan envisions construction of five LNG production trains in four phases, totalling capacity of 27.6mn t/yr. Woodside is targeting completion of the Tellurian acquisition during October-December ahead of a final investment decision (FID) on Driftwood in January-March 2025, with its first LNG from 2029.

The transaction adds scalable US LNG to Woodside's existing 10mn t/yr equity production in Australia, chief executive Meg O'Neill said on 22 July, with Driftwood complementing its existing output and enabling the company to better service customers while opening further marketing opportunities, including in the Atlantic basin.

Tellurian planned to make a FID on Driftwood this year after beginning the plant's regulatory approval process in 2016. But the terminal does not yet have any publicly announced term customers.

Contracts worth 9mn t/yr to supply Shell and trading firms Gunvor and Vitol were cancelled last year, as Tellurian did not reach a FID by the deadlines set out in the supply contracts.

Woodside expects development costs of around $900-960/t for phase 1 and 2, which total 16.5mn t/yr capacity, implying a project worth about $10.6bn excluding pipelines. Phase 1 construction is under way with pilings for trains 1 and 2 complete, foundation work in progress and pilings under way for its LNG tanks, the firm said.

Woodside earlier this year called off a proposed $53bn merger with fellow Australian independent Santos, with it focusing on completing its $12bn Scarborough project offshore Western Australia by 2026.

By Tom Major