2019 was a significant year in the LNG world with many firsts. We witnessed the signing of a rare coal index linked LNG price deal between Shell and Tokyo Gas (possibly a first ever for Japan and maybe even in the world).
We also saw two US based LNG firms announce alternatives to HH pricing options for contracts being signed for their new planned projects. Not only this, 2019 saw record FIDs for investments of $50 billion in LNG projects with a total capacity of 71 MTPA. Argentina saw the first export of LNG and the UK witnessed the largest growth in LNG imports (Eight Million Tonnes).
The incremental production for the year 2019 was 42 Million Tonnes (MT), the highest ever, surpassing 39 MT in 2010. However, possibly the most interesting development of all came towards the latter part of the year when Petronet LNG Limited (PLL), the largest importer of LNG in India (which is one of the fastest growing energy markets around the world), signed a 5 MTPA deal (MoU) with Tellurian – a new ‘LNG’ kid on the block, with an innovative business model.
Under the deal (definitive agreements yet to be signed), PLL will invest $ 2.5 Billion in Driftwood LNG and guarantee $4.25 Billion of debt to obtain the right to offtake 5 MTPA of LNG. This was Tellurian’s second and most important deal so far. Tellurian’s first deal was with Total for 1 MTPA of LNG.
Much has been said and written about the PLL and Tellurian deal already with analysts (both stock and commodity) digging deep into the fundamentals of the deal and putting their bets either for or against. This article is not an attempt to dissect the deal and predict the winner or loser – which is something that will only become clearer with time.