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GAIL India proposed 26 percent equity investment in US LNG project may be seen as a step closer towards Driftwood LNG

GAIL India seeks to invest up to 26% in equity of an existing or an upcoming US-based liquefaction project, to be commissioned by calendar year 2026-27and buy 1 million omt/year term LNG on free on board (FOB) basis for 15 years from the same entity.

GAIL is an experienced player in the US market with two existing term deals- 3.5mil mt/year with Cheniere Energy’s Sabine Pass liquefaction terminal and 2.3mil mt/year with the Cove Point LNG, totalling 5.8mil mt/year of LNG.

The liquefaction terminal operators and promoters of existing and upcoming export terminals can submit their proposals by Mar 10, 2023.

The move seems to be a promising news for the Driftwood LNG, promoted by Tellurian Inc. During the India Energy Week early in February, Tellurian Inc. top management was quite vocal about their interest in attracting Indian investment in Driftwood. Tellurian CEO Octavio Simoes was quoted by S&P Global at India Energy Week that if Indian companies becomes equity partners in Driftwood LNG they can “lift LNG at the cost of producing LNG.”

Tellurian has been struggling to save its last of the long-term customers- trading major Gunvor from the leaving the project. To save it Gunvor deal, Tellurian management needs to achieve financial closure of first phase of the project by February 28, 2023.

Last September, Shell and Vitol pulled out of the Driftwood project where Tellurian would have sold 3mil mt/year LNG to each from its 27.6 mil mt/year Driftwood LNG project for 10 years. Tellurian had signed two separate deals with both the companies in 2021. French major TotalEnergies had terminated its agreement with Tellurian earlier in 2021. Gunvor is the last buyer left with Tellurian with 3mil mt/year term contract for 10-year, from the Driftwood LNG project.

Among the non-US liquefaction projects, Novatek of Russia also approached Indian LNG companies, especially GAIL India to sell LNG from its Arctic 2 LNG project. Talks between the two sides apparently reached a dead-end as GAIL India was insisting on a FOB deal while Novatek was keen on an ex-ship supply of LNG. Considering the troubles in shipping LNG amid Russia-Ukraine war, GAIL was not so keen for any ex-ship basis deal with Russian major.

GAIL was also holding talks with the UAE major and the oldest supplier of LNG, ADNOC. GAIL is struggling to fill the gap caused by the loss of 2.5mil mt/year LNG it lost from Gazprom Singapore due to Russian Ukraine war.