LNG developer Tellurian proposed Monday building two additional natural gas pipelines to move increasing output of shale supplies in the Permian and Haynesville shale plays to the US Gulf Coast and boosting the access to cheap feedgas for its planned Driftwood export terminal in southwest Louisiana, reports Platts.
The announcement comes as the Houston-based company tries to convince investors and LNG buyers in Asia, Europe, the Middle East and Latin America that its liquefaction facility will be a low-cost, high-return option among the dozen or so terminals eyeing a startup early in the next decade.
While none of the second wave of US projects has taken a positive final investment decision this year, Tellurian is aiming to prove commercial viability in 2018, at the same time as it will be soliciting shipper interest in its proposed 2 Bcf/d Permian Global Access Pipeline and 2 Bcf/d Haynesville Global Access Pipeline.
The company's previously proposed 4 Bcf/d Driftwood Pipeline is proceeding through the regulatory process. Together, the three pipelines are projected to cost $7.3 billion.
"The Tellurian Pipeline Network would serve the approximately 8 Bcf/d of incremental natural gas demand expected by 2025 in southwest Louisiana," CEO Meg Gentle said in a statement.
While traditionally an oil play, the Permian in West Texas and southeastern New Mexico has been seeing a surge in associated gas being lifted, and producers are increasingly looking for takeaway options to move those supplies to the coast, where the resources are in high demand for both domestic use and exports.
Favorable oil prices have continued to drive fast growth in the Permian over the last year, with internal rates of return estimated to be 41% in the Delaware Basin sub-territory and 37% in the Midland Basin sub-territory, Platts Analytics data show.
Permian dry gas production has grown 1.1 Bcf/d over the course of 2017, and is currently estimated around 6.2 Bcf/d, Platts Analytics data show. Additionally, Platts Analytics anticipates an additional 1 Bcf/d of growth by July 2018.
Total Permian gas takeaway is currently estimated to be 70% utilized and continues to rise with production growth. Given the current forecast, the Permian may begin to see gas takeaway constraints as early as mid-2019.
Tellurian is one of several companies aiming to alleviate the constraints, and while multiple pipeline projects are expected to be built by the end of 2019, additional capacity may be needed past that.
Louisiana's Haynesville Shale, because of its proximity to several LNG terminals that are being developed, is also in need of additional pipeline infrastructure, especially due to bottlenecks at interconnections that move those supplies southward.
Like the Permian, the Haynesville has also seen a turnaround in gas production over the past year, after appearing to have bottomed out around 6 Bcf/d at the end of 2016.
Gas production has grown 1.2 Bcf/d since January, and is currently estimated to be around 7.5 Bcf/d, Platts Analytics data show.
This growth is currently forecast to continue, exceeding its previous 2011 high of 10.7 Bcf/d by the end of 2021.
Tellurian's latest planned pipelines also would aid its own production efforts, as it earlier this year bought drilling assets in the Haynesville and said it is talking to producers about expanding its acreage footprint to the Permian and South Texas' Eagle Ford Shale.
The proposed 3.4 Bcf/d Driftwood LNG export terminal in Calcasieu Parish, Louisiana is expected to start up in 2022. Tellurian hopes to begin construction on at least the first phase of the project after securing commercial support next year.
While confident Tellurian will be successful, Gentle told S&P Global Platts on December 8 that the company has a Plan B that could mean a buyout.
Permian Global Access Pipeline would be an about 625-mile, 42-inch-diameter pipeline, originating at the Waha Hub in Pecos County, Texas, and connecting to the Permian and associated shale plays located around Midland, Texas. It would terminate near Gillis, Louisiana, with proposed deliveries to Creole Trail Pipeline, Cameron Interstate Pipeline, Trunkline Gas, Texas Eastern Transmission, Transcontinental Gas Pipe Line, Tennessee Gas Pipeline, Florida Gas Transmission, and Tellurian's previously proposed 96-mile Driftwood Pipeline.
Haynesville Global Access Pipeline would be an about 200-mile, 42-inch-diameter pipeline with proposed deliveries to the same interstate pipelines near Gillis. Driftwood Pipeline would move gas from Gillis to Tellurian's LNG terminal.
Driftwood Pipeline is expected to be in service in 2021 and the two newly proposed pipelines would follow in 2022.
Joey Mahmoud, a former executive vice president of engineering and construction at Energy Transfer Partners, has been named president of Tellurian's pipeline operations, the company said. At ETP, Mahmoud was a key figure in the development of the 3.25 Bcf/d Rover Pipeline.