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Magnolia LNG Project update

LNG Industry,

Liquefied Natural Gas Limited (Company) has provided a general update on the development progress of its wholly owned 8 million tpa Magnolia LNG Project (MLNG Project), in the US state of Louisiana. The MLNG Project is held through the Company’s indirect 100% owned US subsidiary, Magnolia LNG, LLC (MLNG) and is being designed to comprise four LNG trains, each with a 2 million tpa nominal LNG production capacity.

The MLNG Project’s pre-filing process (project approvals and permits) continues to be on track for the lodgement of all 13 draft resource reports, with the US Federal Energy Regulatory Commission (FERC) in November 2013.

The Company executed a legally binding definitive equity commitment agreement and fixed Magnolia LLC contracts with Stonepeak Partners LP (Stonepeak) during October 2013. The key terms were advised to Company shareholders on 26 July 2013, including that Stonepeak would 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 would be granted an 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. This fee is estimated at US$ 66 million.

During November 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 to ensure that all material MLNG Project agreements and other documents are in a bankable form.

The Company has issued a draft definitive tolling agreement to Brightshore Overseas Ltd (Brightshore), an affiliate of the 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 million tpa firm, and 0.3 million tpa interruptible, LNG production capacity in the MLNG Project.
  • Inflation adjusted fixed and variable operating and maintenance fees.

The Company will deliver a draft legally binding tolling agreement in November to Gas Natural SDG SA (GNF), under which MLNG will reserve for GNF firm LNG production capacity of up to 1.7 million tpa and interruptible capacity of up to 0.3 million tpa. The general terms and conditions will be similar to the Brightshore tolling agreement.

The Company is also negotiating with and will select its preferred Engineering, Procurement and Construction (EPC) Contractor during the December quarter. The preferred EPC Contractor will provide 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 million tpa of LNG production capacity.

In October 2013, MLNG filed for additional export approval with United States Department of Energy to export up to 8 million tpa of LNG to countries that do not have free trade agreements with the US and an additional 4 million tpa to free trade agreement countries.

MLNG is on track to open its local project office in Lake Charles Louisiana in December 2013.

Adapted from press release by Ted Monroe

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