USA: Magnolia LNG Project on Track

Liquefied Natural Gas Limited provided a general update on the development progress of its wholly owned 8 million tonnes per annum (mtpa) Magnolia LNG Project (MLNG), in Louisiana, US.

The MLNG Project is held through the company’s indirect 100% owned US subsidiary, Magnolia LN (MLNG) and is being designed to comprise four LNG trains, each of 2 mtpa nominal LNG production capacity.

• The MLNG Project’s Pre-Filing process continues on track for the lodgement of all 13 draft Resource Reports, with the US Federal Energy Regulatory Commission (FERC) in November 2013. Attached is a copy of the September 2013 Monthly Progress Report, submitted to FERC, as required under the FERC regulations.
• The company expects to execute an Equity Commitment Agreement and the Magnolia LNG LLC Agreement with Stonepeak Partners LP (Stonepeak) during October 2013. The key terms were advised to company shareholders on 26 July 2013, including that Stonepeak will provide 100% of the MLNG Project’s equity finance requirement from financial close (currently estimated at ~US$660 million), for the construction and commissioning of the MLNG Project. In consideration of the equity financing, Stonepeak will be granted a currently estimated 50% interest in the MLNG Project, at financial close. The company will receive a one-off success fee on the MLNG Project achieving financial close, equivalent to 3% of the total MLNG Project capital cost (such fee is estimated at US$66 million).
• During October 2013, the company and Stonepeak will appoint a Financial Advisor from a shortlist of three international banks, with proven financial advisor and project financing experience. The Financial Advisor will assist MLNG secure long term project debt financing for the MLNG Project, which is estimated at US$1,540 million. In this regard, Stonepeak and the Financial Advisor will work with the Company in ensuring all material MLNG Project agreements and other documents, are in a bankable form.
• The company has issued a preliminary draft definitive Tolling Agreement to Brightshore Overseas, an affiliate of Gunvor Group. Under the agreement, Brightshore is responsible to deliver gas, including gas usage for the LNG plant, at its own expense, to the MLNG Project for liquefaction, storage, and delivery onto LNG ships arranged by Brightshore. Other terms include the payment by Brightshore of a Fixed Monthly Capacity Fee, to be paid over 20 years, to secure 1.7 mtpa firm, and 0.3 mtpa interruptible, LNG production capacity in the MLNG Project and inflation adjusted fixed and variable operating and maintenance fees.
• The company is on track to deliver to Gas Natural SDG SA (GNF) a draft legally binding Tolling Agreement in October 2013, under which MLNG will reserve for GNF firm LNG production capacity of up to 1.7 mtpa and interruptible capacity of up to 0.3 mtpa. The general terms and conditions will be similar to the Brightshore Tolling Agreement.
• The company is also on track to select its preferred Engineering, Procurement and Construction Contractor and to obtain from the EPC Contractor, in November 2013, a total capital cost estimate range for the MLNG Project.
• Negotiations are well advanced with a number of other parties to secure tolling arrangements for the MLNG Project’s remaining 4 mtpa of LNG production capacity.
• MLNG will lodge, in October 2013, its application to export up to 8 mtpa of LNG to countries that do not have Free Trade Agreements with the US.
• MLNG has established its US Head Office in Houston, Texas and a local project office in Lake Charles will be opened in the December 2013 quarter.

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LNG World News Staff, October 09, 2013; Image: LNG Ltd