Tellurian’s proposed Driftwood liquefied natural gas project in the US is poised for a much needed financial shot in the arm that has the potential to help transform the economics of the development envisaged with ultimate capacity of 27.6 million tonnes per annum.

Tellurian has entered into a binding letter of intent (LOI) with an unnamed New York-based institutional investor to sell for $1 billion and lease back for 40 years approximately 800 acres of owned and leased land to be used for the proposed Driftwood LNG project in Lake Charles, Louisiana.

Driftwood has been dealt a number of blows in the past 12 months, losing both Shell and Vitol as lined-up foundation customers for 3 million tpa apiece in the third quarter last year. Meanwhile, a sales and purchase agreement to supply 3 million tpa to Gunvor Trading can be pulled at any time by the intended purchaser.

Details unveiled

Terms of the master lease for the site land will include a capitalisation rate of 8.75%, annual rent escalators of 3% and a requirement that Driftwood LNG post a letter of credit equal to 12 months’ rent.

The LOI envisages the parties will use commercially reasonable efforts to finalise the purchase agreement and master lease on or before 14 July. The LOI will terminate on that date if Driftwood LNG has failed by then to identify the contingent guarantors and will terminate on 31 July if the purchaser elects, at its sole discretion, not to approve such guarantors. The LOI is binding on the parties but is subject to the negotiation of definitive transaction documents and the approval of those documents by the company’s board of directors.

Driftwood said closing of the deal would occur on the later of 91 days after the purchase agreement is executed by the parties and satisfaction of the closing conditions in the agreement, including Driftwood LNG securing financing commitments for phase one of the Driftwood liquefaction project on terms satisfactory to the mystery buyer.