Magnolia Project on Track for First LNG in 2018
Providing a general update on the development progress of its 8 million tonne per annum (mtpa) Magnolia LNG Project (MLNG Project), in Louisiana, the Directors of Liquefied Natural Gas Limited (LNGLF) (LNGL) said the project is on track for first LNG in 2018.
The MLNG Project is held through the company’s indirect 100% owned U.S. subsidiary, Magnolia LNG, LLC (MLNG), and is being designed to comprise four LNG trains, each of 2 mtpa design capacity and guaranteed 1.7 mtpa firm production capacity.
1. LNG Offtake Agreements
• Advanced negotiations continue with two parties for approximately 4 mtpa with anticipated contract closings once the third parties sign their customer agreements and/or receive required Board approvals, which will occur after March 31, 2015.
• Magnolia LNG is confident it will close bankable offtake agreements for the full 8 mtpa of capacity, with initial LNG production from Train 1 forecasted for late 2018.
• Market demand is strong for MLNG’s offtake reflected by:
o Four non‐binding LNG tolling agreement (LTA) term sheets in place for a total of approximately 7 mtpa;
o Two parties with combined demand of approximately 1.7 mtpa negotiating LNG sales and purchase agreements (SPA);
o 3.7 mtpa of draft LTAs in “mark‐up stage” with three other parties; and
o Four other parties, for approximately 6 mtpa demand, in early stage contract discussions for SPAs or LTAs.
2. Federal Energy Regulatory Commission (FERC)
• FERC’s progress toward MLNG’s draft environmental impact statement (DEIS) announced on March 19, 2015.
• MLNG delivered timely responses to FERC’s data Request for Resource Report 9 on February 27, 2015.
• FERC issued an engineering data request on March 20, 2015, and the company will deliver its response in a timely manner. FERC advised that it might issue additional engineering questions.
• FERC procedure is to issue a Schedule of Environmental Review followed by the issue of a DEIS once it is satisfied it has received all required information from MLNG.
3. Engineering, Procurement and Construction (EPC) Contract
• The joint venture between KBR and SKE&C (EPC JV) announced March 2, 2015.
• Negotiation of a bankable EPC contract between MLNG and EPC JV is underway, with terms disclosed upon conclusion of these negotiations. MLNG does not expect any material changes to terms previously agreed with SKE&C, prior to formation of the EPC JV.
• The EPC JV should complete all pre‐EPC contract activities in the second quarter with a resulting lump sum fixed price EPC contact agreed thereafter. The EPC contract will have a fixed price validity period of six months during which time the MLNG Project will complete its project financing.
• Commencement of an “Early Works” program in the second half of 2015, comprising initial detailed engineering and ordering of critical long‐lead equipment items, accelerates site work schedule following receipt of the Notice to Proceed from FERC.
• The Early Works program coupled with commencement of site work in early 2016 enables forecasted first LNG production in late 2018.
Company Managing Director and Magnolia LNG President, Maurice Brand said, “I am pleased with the solid progress by Magnolia LNG and the contribution being made by management and recently appointed staff.”
Brand continued, “In order to assist Magnolia LNG management to ensure the above timetable is realized and Magnolia achieves financial close in 2015, I will be relocating to Houston at the end of April 2015. This will also enable me to work more closely with the Houston‐based Company CFO, Michael Mott on various corporate matters including the proposed dual share listing on ASX and NYSE, as well as with the Bear Head project team to achieve financial close for that project in 2016.”
