USA: Magnolia LNG Project on Track
Liquefied Natural Gas Limited provided a general update on the development progress of its wholly owned Magnolia LNG Project (MLNG Project), in Louisiana, United States of America.
The MLNG Project’s Pre‐Filing process (project approvals and permits) is on track for the lodgement of all 13 draft Resource Reports, with the US Federal Energy Regulatory Commission (FERC), in November 2013.
The company expects to execute an Equity Commitment Agreement with Stonepeak Partners this month. The key terms were advised to company shareholders on the 26 July 2013, including:
– Stonepeak and the company will cooperate, under a dedicated strategic alliance, in the development, funding, construction and operation of the MLNG Project;
– Stonepeak will provide 100% of the MLNG Project equity finance (currently estimated at ~US$660 million) from financial close, for the construction and commissioning of the MLNG Project. In consideration of the equity financing Stonepeak will be granted an estimated 50% interest in the MLNG Project, at financial close.
– The final Stonepeak equity interest in the MLNG Project will be determined at financial close, based on an agreed MLNG Project financial model and an agreed Stonepeak internal rate of return on its equity investment;
– 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);
– Stonepeak will assist the company to secure long term project debt financing, which is estimated at US$1,540 million. In this regard, Stonepeak will work with the Company in ensuring all material MLNG Project agreements and other documents are in a bankable form; and
– Stonepeak will be entitled to appoint one manager to the Board of Magnolia LNG, LLC (MLNG Project ownership company), but the manager will have no voting rights prior to financial close and the commencement of Stonepeak’s MLNG Project equity contributions.
The company will issue, on schedule, the first draft of a definitive Tolling Agreement to Brightshore verseas Ltd, an affiliate of Gunvor Group. The key terms include:
‐ Brightshore shall be 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;
‐ 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 mtpa, plus 0.3 mtpa of interruptible capacity, in total being equivalent to one LNG train;
‐ Brightshore will pay to the company:
• A Fixed Monthly Capacity Fee over the 20 years, that will total approximately US$3.7 billion;
• A Fixed Monthly Operating and Maintenance Fee, which increases in line with US inflation;
• A 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 the MLNG Project obtains authorisation from the US Department of Energy, Office of Fossil Energy, for the export of LNG to countries that do not have a Free Trade Agreement with the US;
‐ Brightshore will be provided certain preferential rights, as a foundation customer of the MLNG Project; and
‐ Brightshore and the company agree to work together with the intention of agreeing and executing a legally binding Tolling Agreement. The Company is required to submit the first draft of the Tolling Agreement by the 30 September 2013.
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. GNF will be responsible for the delivery of gas, including gas usage for the LNG plant, to the MLNG Project for liquefaction, storage and delivery onto LNG ships arranged by GNF.
LNG Limited is also on track to select its preferred Engineering, Procurement and Construction (EPC) Contractor and to obtain from the Contractor, in November 2013, a total capital cost range for the MLNG Project.
The company has executed an agreement to lease office premises in Houston, US which will be fully operational in October 2013.
The company is now in the process of building a strong MLNG Project management team in the US and has this week made the following appointments:
– Ernie Megginson – Vice President, Development
Ernie has been assisting the company in the development of the MLNG Project since October 2012. Activities include Department of Energy filings; FERC filings; coordinating local and state
government relations, technical design, and environmental permitting.
Prior to commencing work on the MLNG Project, Ernie managed the proposed LNG import project for the Jamaican Government (2011 – 2012) and provided consulting services (through his company, Megginson and Associates, Inc.) to the Energy sector (2003‐2012), including a number of US projects covering gasification, biomass, biodiesel, tar sands and petcoke gasification projects.
Ernie worked with major global energy groups, including Texaco, Amoseas, and ChevronTexaco prior to establishing his own consultancy practice in 2003.
– James (Jim) Schulz – Engineering Manager
Prior to joining the MLNG Project team, Jim worked with Chevron Global from 2008 on the Wheatstone Downstream LNG Project, off‐shore Western Australia, in the capacity of Pre FEED Lead Engineer and as an Area Engineering Manager.
From 2005 to 2008, Jim was Project Director for Cheniere Energy, Inc’s. Sabine Pass LNG terminal, having joined Cheniere in 2005 from MW Kellogg Company / Kellogg Brown & Root where he worked on a number of LNG and Energy related projects from 1978.
– Komi Hassan – Environmental, Health and Safety Manager