Souki, who was the driving force behind the US' first LNG exporter Cheniere Energy before being unceremoniously booted out last year following disagreements with billionaire activist investor Carl Icahn, intends to vend Tellurian into Magellan.

The aim is to crease a public company focused on the development of a mid-scale LNG projects on the US Gulf Coast, more agile than many of the big megaprojects being proposed for the Gulf Coast, and using a staged-development method similar to Australia's LNG Limited.

Jointing Souki is Tellurian co-founder Martin Houston, a former chief operating officer of BG Group.

The two companies have signed a definitive merger agreement.

"This transaction concludes our strategic alternatives review process and we believe offers a unique opportunity for Magellan's shareholders to participate at an early stage in an investment potentially similar to Cheniere Energy's remarkable success, under the leadership of Charif Souki," Magellan president Thomas Wilson enthused overnight.

"He and Martin Houston are proven leaders in the LNG industry."

Until recently Wilson was a director of Central Petroleum, but he recently stepped down to focus on Magellan's US interests.

He had consolidated the US company's control of Magellan Australia in 2009, and developed an Australian methanol strategy that ultimately never eventuated, before selling out to Central.

And, while Magellan is getting into LNG during a glut, the two companies see benefits in this new direction.

Houston said the Tellurian team had developed plans for the proposed 26MMtpa Driftwood LNG project in Louisiana, and had a deep relationship with Bechtel and its sub-contractors, GE and Chart Industries.

"(These) are key factors that we believe will drive the successful development of one of the most cost-competitive LNG projects globally," Houston said.

"With this transaction, we will be able to access more attractive financing in order to develop Driftwood LNG, which should come on stream in 2022, just as the markets for new LNG open up."

While Cheniere is building five trains at Sabine Pass, Tellurian will aim at producing LNG in units of 700,000tpa, a level which it says are much more flexible than megaprojects.

The mid-scale trains will have just one compressor per liquefaction unit, and will be developed using a "design one, build many" approach.

The board of directors of each company has unanimously approved the terms of the agreement and has recommended that its shareholders approve the transaction, but it is now up to shareholders to approve the deal which offers Tellurian shareholders 1.3 Magellan shares for every Tellurian share.

Magellan will issue some 122 million shares of common stock to Tellurian shareholders, representing 95% of Magellan's pro forma outstanding common stock.

Completion of the merger is also subject to shareholder approval of the Magellan and Tellurian shareholders and regulatory approvals.

The transaction is expected to close in the fourth quarter.