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Tellurian (NYSEMKT: TELL) is not an investment for the faint of heart. The energy company is building a liquified natural gas (LNG) export facility called Driftwood, but it won't be operational until 2028. In other words, there are big risks to consider as you think about what the future holds for the company. Some investors may believe those risks are worth taking, but others will prefer to stay on the sidelines when it comes to this stock.

Here are some things to consider as you try to make your own decision.

Tellurian's big picture story

The world is moving away from dirtier, high-carbon fuels at a time when demand for electricity is increasing. While the fastest-growing part of the energy landscape is likely to remain renewable power sources like solar and wind, those won't be enough to fully power the world. That is why natural gas is increasingly being employed, since it burns more cleanly than coal. Natural gas is something of a transition fuel that's expected to see strong demand for decades to come. It still releases carbon dioxide when burned, but it's a "cleaner" option than coal or oil when it comes to generating electricity.

Image source: Getty Images.

Natural gas is kind of hard to move over long distances. Pipelines are a good solution, but only if the starting and end points are in roughly the same geographic region. That's where LNG comes in. Once natural gas is supercooled to the point where it becomes a liquid, it can be put onto ships and transported around the world, opening up the potential customer base significantly for any given region's fuel. Tellurian is building an LNG export facility so that U.S. natural gas producers can sell the fuel to foreign customers.

This is an attractive story, and other companies have found great success with their own LNG development projects. Dominion Energy built one and sold it to Berkshire Hathaway. Enbridge is in the process of building one. Cheniere Energy, however, is probably the most direct comparison, since it, too, was founded mostly on its aspirations to build LNG assets from the ground up. It succeeded in that attempt and has rewarded investors with a growing income stream.

LNG data by YCharts.

So there are many examples out there that suggest Tellurian could succeed with its big LNG plans. And if it does, its shareholders will probably be well rewarded. The problem is that this LNG facility is still years away from completion, so there's material execution risk to consider. Only more aggressive investors will probably want to take on that risk.

There's progress being made at Tellurian

That said, there are reasons to be upbeat about the future. The first big positive here really isn't something Tellurian did, per se -- it is more just a lucky coincidence. The U.S. government has placed a pause on new LNG export facility approvals, but Driftwood has already been approved, so Tellurian can keep building it without any impact. This increases the value of the project since other companies seeking new facility approvals are currently in a state of limbo. This fact isn't lost on Tellurian, which has openly admitted that it would accept a buyout bid if a good offer came along.

That said, with so much money going out the door for construction, Tellurian's balance sheet had been a worry for investors. In light of that issue, investors should consider it a big positive that late last month, the company announced it had agreed to sell some midstream assets to Aethon Energy Management, and that it would use the proceeds to (among other things) pay down debt. After this transaction is completed, Tellurian will be in a far better position to finish the Driftwood project.

The third positive is that, along with the asset sale, Tellurian got an indication from Aethon Energy that it's interested in taking a material portion of Driftwood's LNG capacity. They don't have a signed deal yet, but it is a good start on the process of getting customers on board. It will likely be easier to get additional customers to sign agreements after the first one inks a deal. If the Driftwood LNG facility has customers lined up ahead of time, it will be able to hit the ground running when it opens for business in 2028.

Tellurian is about balancing risk and reward

Tellurian still has a lot of work ahead of it before it will be anywhere near completing its Driftwood LNG export facility. Between now and then, it still might stumble on the execution front in some way. That is not an insignificant risk. Conservative investors who want to add exposure to LNG to their portfolios have plenty of other options to choose from, including Berkshire Hathaway, Enbridge, and Cheniere Energy.

But if you like the idea of getting in on the ground floor of a new LNG export facility, then Tellurian stock could be for you (and it appears to be one of the few options of its kind currently available). Just be sure you are willing to take on the uncertainty and risk here before you hit the buy button.

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Reuben Gregg Brewer has positions in Dominion Energy and Enbridge. The Motley Fool has positions in and recommends Berkshire Hathaway and Enbridge. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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