Magnolia LNG, Gunvor Sign Tolling Agreement (USA)

Liquefied Natural Gas Limited announced that its wholly owned subsidiary, Magnolia LNG (MLNG), has executed a Tolling Agreement – Term Sheet with Brightshore Overseas Ltd, an affiliate of Gunvor Group.

The Agreement details key terms to be included in a legally binding tolling agreement, including:

• Brightshore shall be responsible to deliver gas, including gas usage for the LNG plant, at its own expense, to MLNG’s Magnolia LNG Project for liquefaction, storage, and delivery onto LNG ships arranged by Brightshore;
• A term of 20 years from first LNG production, plus a five year extension option at Brightshore’s election;
• MLNG shall reserve, for Brightshore, firm LNG production capacity of 1.7 million tonnes per annum (mtpa), plus 0.3 mtpa of interruptible capacity, in total being equivalent to one LNG train;
• Brightshore will pay to MLNG:

1. Fixed Monthly Capacity Fee over the 20 years, that totals approximately US$3.7 billion;
2. Fixed Monthly Operating and Maintenance Fee, which increases in line with US inflation; and
3. Variable Operating and Maintenance Fee based on actual LNG production and which increases in line with US inflation;

• Brightshore will also pay a Fixed Monthly Bonus Capacity Fee in the event that MLNG obtains authorisation from the USA Department of Energy, Office of Fossil Energy, for the export of LNG to countries that do not have a Free Trade Agreement with the USA;
• MLNG to provide certain preferential rights to Brightshore, as a foundation customer of the Magnolia LNG Project; and
• The parties’ agreement to work together with the intention to agree a legally binding Tolling Agreement. The Company is required to submit the first draft by the 30 September 2013.

The Company’s Managing Director, Mr Maurice Brand, said “this is a major step for the Magnolia LNG Project and demonstrates confidence in the technical and financial fundamentals of the project. The key commercial terms support the economics of proceeding on the basis of only one (2 mtpa) LNG train. However, it remains the Company’s objective to secure a further tolling party (or parties) to proceed with a second 2mtpa LNG train and, to this extent, the Company expects to enter into further Tolling Agreement Term Sheets or Heads of Agreement during 2013.” “In view of the substantial progress of the Magnolia LNG Project, the Company will issue a comprehensive update on the Magnolia LNG Project later this month”, added Mr Brand.