Indonesia: EWC Updates on Sengkang LNG Project
Energy World Corporation (EWC) provided a further update in relation to its Sengkang LNG Project, and the arrival of major equipments and two cold boxes on the project’s site.
The second shipment of major equipments including the further two cold boxes is now offshore, after a five week delay at Port Headland, Australia due to port congestion, and is awaiting to be offloaded at the end of the Indonesian national holiday.
Although the company has experienced earlier delays to the expected timetable for the Sengkang LNG Project pending approval by BPMigas of its Plan of Development for its WASAMBO gas fields, the company has been able to avoid a cost blow-out’ or indeed any significant increase to the budgeted total capital cost because its contracts for its land, major equipment and EPC contract were placed in 2007, 2008 and 2009.
As reported to date, total capital expenditure for the Sengkang LNG Project, that is the cost of major equipment, engineering and construction necessary for an LNG facility to enable production of 2 MTPA of LNG, is estimated to be USD 352 million, which remains materially consistent with the budget initially outlined in the company’s 2008 Annual Report.
Total incurred project costs as of 30 June 2012 are approximately USD 224 million, which includes approximately USD 200 million of capital expenditure for the Sengkang LNG Project and approximately USD 24 million of additional related costs, in particular land acquisition costs and incurred and accrued finance charges.
On 17 June 2011, BPMigas approved the company’s Plan of Development necessary for the initial production, processing and supply of gas from its WASAMBO gas fields.
The scope of work under the Plan of Development envisages an estimated expenditure of up to USD 88 million (which will be cost recoverable by us through the Company receiving an increased share of gas sale proceeds).
Related work programs and budgets for drilling and seismic works have been agreed with BPMigas for expenditure for the calendar years 2012 and 2013.
Expenditure under this Plan of Development commenced after 30 June 2012.
The company expects to continue to develop its gas resource, if justified, and so incur further capital expenditure (which will also be cost recoverable) in respect of future gas field development under further Plans of Development to be agreed with BPMigas.
The company’s capital expenditure for the Sengkang LNG Project and the WASAMBO Plan of Development have been financed from the Company’s own resources, the proceeds of placement of shares in May 2008 and July 2011, and utilising its finance facilities.
The company has sufficient internal funds and facilities for the development of the first two 0.5 MTPA modular trains and its budgeted expenditure in the period to 30 June 2013.
The company is in discussions with financiers in relation to project finance for the Sengkang LNG Project which, if successfully arranged, should result in a portion of its equity investment being released back to the company.
The company announced in its 2011 Annual Report that its planning for the first 1 MTPA production of LNG would likely occur from second quarter 2013, with the additional modular trains, subject to satisfactory gas field development, expected to be ready to commence commercial production of LNG at three month intervals thereafter.
In relation to this timetable, due to the longer than expected time to ship the equipment to site, the company is currently reviewing this program and will announce any material revisions to this timetable to shareholders upon completion of this review.
The estimated timetable for commercial operation tor the Sengkang LNG Project remains subject to certain material risks and uncertainties, with both usual construction risks for the outstanding construction programme and country risk in relation to the legal, regulatory and physical environment of Indonesia.
In particular, as referred to in the company’s 2011 Annual Report, the company is in negotiations with PLN regarding the necessary supply of electricity to the Sengkang LNG Project.
In addition to various permits and approvals for the project, the company is required to obtain an operating licence in order to operate the Sengkang LNG Project, a condition to which is that the company enters into an LNG offtake agreement The company remains in discussions with relevant triird parties regarding these matters.
LNG World News Staff, August 20, 2012