American companies are trying to figure out how to sell more natural gas to the rest of the world. Meg Gentle, Tellurian’s chief executive officer (CEO), has a bold idea that just may be the answer the US is looking for.
In order to ship liquefied natural gas across the country and elsewhere around the world, companies throughout the United States are constructing terminals that allow gas to be chilled and loaded into tankers. Tellurian, a Houston-based company, is one of those companies – however, their ambition to produce natural gas sets them apart and may make them the leader in creating a bold impact in green energy.
A $24 Billion Bold Idea
Tellurian’s plans are estimated to cost about $24 billion. As such, Gentle needs to convince potential buyers to purchase equity interests. What do they get in exchange? A future where gas is actually affordable.
Liquefied natural gas is a game changer because of its flexibility and potentially lower cost, albeit still an experimental phase in what could be the future of energy worldwide.
In a strange twist, stock investors are still adamant to Gentle’s idea. The stock fell about 10% already this year – thus creating a market value of only $2 billion, a generally large amount but still not enough to fund the other $22 billion needed. However, there is still plenty of hope, as a number of major energy companies have at least expressed interest in backing Tellurian.
The young, two-year-old startup is counting on funding from both General Electric Co. and French oil company Total SA. In addition, Tellurian has also had several talks with Aramco (also known as Saudi Arabian Oil Co.) about a potential investment as the Arabian company is looking for deals in the US.
What’s more, Tellurian’s senior vice president (SVP) Amos Hochstein publicly stated that the US may need to invest about $150 billion in infrastructure in order to support the growing production of natural gas. It should be noted that some producers have been shutting down lately as they try to increase output.
Hochstein explained that as oil prices rise, producers of shale oil (oil produced from shale rock) need to increase their output and also produce other gases to keep up with the demand. Unfortunately, there is not enough pipeline to reach such demand.
“We need well over $150 billion worth of investment in infrastructure in the United States to support the gas production that is coming online,” Hochstein said. Gentle affirmed it may even be $170 billion, as such a network of pipelines, export terminals, compressor stations, and other much needed infrastructure are required for this bold idea to come to fruition.
There has been little to no support when it comes to export terminals for liquefied natural gas (LNG). Additionally, US infrastructure currently has trouble supporting shale oil and shale gas – its infrastructure was built for traditional energy sources and have not yet been updated for greener resources. “One threat to the U.S. being able to export LNG and expand its export capability is the overall commitment to invest in infrastructure to move natural gas,” Gentle explained.
As early as two years ago, Total invested $207 million in Tellurian – acquiring 23% of shares at $5.85 per share at the time. “Total’s investment materially strengthens Tellurian’s position as a large infrastructure development company and is an important milestone in the growth of Tellurian’s LNG business, including the Driftwood LNG project in Calcasieu Parish, Louisiana,” Gentle stated at that time.
Only recently, Tellurian’s subsidiary Permian Global Access Pipeline announced their search for shippers that could back a $3.7 billion interstate pipeline connecting the Permian Basin in Texas to southwest Louisiana. Stretching a length of approximately 625 miles, the pipeline will transport gas from Pecos County, Texas to Jefferson Davis Parish, Louisiana. They expect its operation to start by 2022, with a capacity of transporting as much as 2 billion cubic feet of gas daily.
While the US has already established the ability to import and export LNG, the shale gas revolution is still something its proponents need to continuously work on. At the moment, the country is better off becoming an exporter – the abundance of gas supplies allows for cheap production and exporting, which the country needs to take advantage of if they want to establish themselves as a leading name in sustainable energy.