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Total finalises Driftwood LNG deal

French supermajor commits $500m equity investment to Tellurian project

Total is set to invest $500 million in Tellurian's planned Driftwood liquefied natural gas facility in Louisiana, pushing the development closer to a final investment decision.

The French supermajor and US liquefaction player finalised a deal on Wednesday that establishes Total as a joint venture partner of the Driftwood LNG project. In exchange for the equity investment, Total will get 1 million tonnes per annum of LNG from the facility.

The partners also signed a separate definitive sale and purchase agreement for Total to buy additional 1.5 million tpa from Driftwood LNG. Under the terms of the deal, Total will purchase the LNG on a free-on-board at a price based on the Platts Japan Korea Marker.

This investment is not the only one Total has made in Tellurian. Earlier this year, the companies entered an agreement under which Total will purchase shares of Tellurian common stock for approximately $200 million. Total’s aggregate investment in the Tellurian portfolio is expected to be around $907 million at FID which is expected later this year, according to a release.

Tellurian hopes to secure a handful of other equity investors for the project. Total's participation could provide a valuable model, Credit Suisse said in a note.

"Until now, it was unclear how the partnership governance would be administered. We expect this agreement with Total to serve as the blueprint for future subscriptions from other partner-customers," according to the note.

"The signing of this deal should clear the way for others to join the Driftwood project. We suspect several parties were waiting for this event before formalizing their participation."

Tellurian chief executive Meg Gentle said the agreements confirm Driftwood LNG's business model.

"The Tellurian team thanks Total for their leadership and we look forward to beginning the largest privately funded US infrastructure project," she said. "We intend to finalise the agreements with the remaining partners and make FID in 2019. At full capacity, Driftwood will be capable of exporting approximately 4 billion cubic feet per day of natural gas, providing solutions for the acute US oversupply and delivering cleaner air to the world."

The Driftwood LNG project envisages a 27.6 mtpa liquefaction export facility that will be located near Lake Charles.

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