Total buys big stake in Charif Souki’s Tellurian Investments

Paris-based Total said it will buy a 23 percent stake in the new Houston liquefied natural gas company, Tellurian Investments, for $207 million.

The deal combines one of the world’s largest energy giants with LNG export pioneer Charif Souki, who formed Tellurian early this year after he was ousted at the end of 2015 from his chief executive role at Houston-based Cheniere Energy.

Tellurian is developing the $12 billion Driftwood LNG project south of Lake Charles, Louisiana as part of the next wave of LNG export projects. The goal is to bring it online in 2022 with the expectation that global demand growth by then will have wiped away the anticipated glut of LNG in the coming years.

Philippe Sauquet, Total president of gas, renewables and power, said there’s value in joining a team with a strong LNG track record.

“Investing in Tellurian at an early stage will give us the opportunity to potentially strengthen our mid- and long-term LNG portfolio thanks to a very cost competitive project,” Sauquet said in the announcement.

Following news that BP is investing in an LNG export project in West Africa, these deals show “the majors on going big on small-scale LNG,” said Giles Farrer, global LNG research director for Wood Mackenzie.

The deal legitimizes Tellurian and makes the Driftwood LNG project much more viable, while Total gets to buy a big stake at a relatively low entry point, Farrer added.

The investment also represents another sign the world’s largest energy companies see more value in the environmentally friendlier natural gas than oil long term, said Houston energy investment banking firm Tudor, Pickering, Holt & Co. in an analyst note.

Souki built Cheniere into the nation’s first LNG exporter early this year, but he was pushed out just before exports began for allegedly being over ambitious in a weakened marketplace.

He formed Tellurian with the former chief operating officer of BG Group, Martin Houston. They then poached Cheniere Executive Vice President Meg Gentle and named her Tellurian president and CEO at the end of August.

“Total’s investment materially strengthens Tellurian’s position as a large infrastructure development company and is an important milestone in the growth of Tellurian’s LNG business,” Gentle said in a prepared statement.

The privately held Tellurian is in the process of going public through the reverse takeover of the public, but financially failing Magellan Petroleum Corp., of Denver.

The Magellan deal is expected to close in the first quarter of 2017. Tellurian has not announced whether the company’s name will change after going public.

In November, General Electric’s oil and gas division, which is combining with Houston-based Baker Hughes, agreed to buy a small stake in Tellurian for $25 million.

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