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Tellurian-Petronet LNG Deal Comes Up at Howdy Modi


Sep. 23 2019, Updated 6:30 p.m. ET

Tellurian Inc (TELL) is on the way to bag a big deal. On September 21, 2019, Tellurian signed a non-binding MoU (memorandum of understanding) with Petronet LNG Limited. Petronet (PETRONET) is the largest LNG (liquified natural gas) importer in India. The MoU was signed in the presence of Indian Prime Minister Narendra Modi. In addition, the company has a market cap of INR 379.994 billion or about $5.3 billion.

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Tellurian-Petronet deal to span 40 years

The Tellurian-Petronet deal will cover a LNG supply of up to 5 million tonnes per annum to the Indian market. However, the size itself is enough to lift India to one of the highest US importers of LNG. And Petronet plans to close the deal by making equity investments in the Driftwood LNG terminal.

However, due to the large scale, the deal value and equity investments have yet to be announced. The specifics and fine prints of the deal will be finalized before the end of March 2020. Once signed, the Tellurian-Petronet agreement will last 40 years.

In the next six months, both companies will look closely at the due diligence involved. They will also look at the magnitude of equity investments in the project. Meg Gentle, president and CEO of Tellurian, said, “At Tellurian, we look forward to a long and prosperous partnership with Petronet in the Driftwood project.”

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Tellurian: uniting the US and India

On September 22, the Howdy Modi event in Texas took place. It marked an era of growing unity between the world’s greatest and largest democracies. President Trump shared the stage with Prime Minister Modi at the NRG Stadium in Houston. Houston is considered the energy capital of the world. Trump said, “Our shared dreams and bright futures” are the uniting factors for both America and India.

While addressing the crowd, President Trump talked about multiple investment ventures between the US and India. One of the highlights was the upcoming Tellurian-Petronet LNG deal. “LNG exports by the US are soaring at record numbers,” said President Trump. Trump emphasized that “No issue is more important than energy security. For the first time ever, the US is the number one producer of both oil and natural gas on planet Earth.” Also, the president said that the great state of Texas contributes the most to oil and natural gas production.

Also, another Texas-based natural gas company, Energy Transfer Partners (ETP-E), announced expansion plans. The company will buy SemGroup (SEMG) for $5 billion. For more insights on ETP-E acquisition and a peek into the company financials, click here. We believe that the president’s statement could lead to more investments in the energy sector.

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LNG Exports by the US

The US Department of Energy shows regular statistics about US exports for oil and natural gas. As per LNG Monthly, published in September 2019, the exports to the top five countries made up 64.5% of the total US LNG exports. The top five countries were South Korea (18.2%), Mexico (15.5%), Japan (9.6%), China (7.6%), and Chile (5.3%). As per the report, India ranked sixth in the list amounting to 5% of LNG exports.

Before the Howdy Modi event and the Tellurian-Petronet deal, Prime Minister Modi met with about 17 CEOs from companies of the energy sector. The round table discussion was about growing business opportunities in India. Leaders from Exxon Mobil Corporation (XOM), BP PLC (BP), and Tellurian were present. However, many more were present for the conference.

The demand of over 1.3 billion people in India is a sizable market for US energy companies. In a bid to get foreign investors, the Finance Minister of India recently planned a cut in corporate tax rates. The new rates from the fiscal year of 2019 will be lower than the corporate tax rates in the US. With a slash in tax rates and a high demand market, India shows a great investment opportunity. In addition, to cement its energy ambitions, India will also host the India Energy Forum from October 13-15. This will take place in the national capital of New Delhi.


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