Brisbane, Dec 1, 2014 (ABN Newswire) – Liquefied Natural Gas Limited (ASX:LNG) (OTCMKTS:LNGLY) (the Company) is pleased to advise that its wholly owned subsidiary, Magnolia LNG LLC (MLNG), has agreed to an EPC contract with SK E&C USA (EPC Contract) in relation to the Company’s Magnolia LNG Project.
The Contract covers the initial 4 mtpa LNG installation, comprising two LNG trains, each with a LNG design capacity of 2 mtpa, two 160,000m3 storage tanks, a jetty and ship loading facility and related infrastructure, and all required approvals and licenses for the full 8 mtpa project. An additional two x 2 mtpa trains (Trains 3 & 4) are planned to follow the initial 4 mtpa installation.
The EPC Contract, which is a Lump Sum Turn Key model, has now been forwarded to BNP Paribas, MLNG’s project finance adviser, Merlin Advisors LLC, the lenders’ technical consultant, and legal advisors White and Case for final review. The finance adviser review aims to ensure third party acceptability of all proposed EPC Contract provisions to enable MLNG financial close consistent with project timelines. The EPC Contract has also been forwarded to Stonepeak Partners LLC, the proposed Magnolia LNG Project Equity partner, for their final review together with its advisers.
Execution of the EPC Contract is planned for later this month, subject to LNGL Board approval. The capital cost for the initial contracted work totals $1.986 billion for the two-train installation and associated facilities, and comprises two components:
1. A Lump Sum, Fixed Price of US$1.391 billion (70% of contract value) valid through 30 June 2015; and
2. A Provisional Sum of US$595 million representing 30% of contract value.
During the period to 31 March 2015, the Company and SK E&C will conduct further optimisation and cost reductions. Any resultant cost reductions will be apportioned between the parties, but in any event, the Lump Sum component will not exceed the agreed fixed price of US$1.391 billion. The Company and SK E&C will continue to develop, finalise and agree the Provisional Sum by 31 March 2015, with the agreed amount converting to a lump sum, fixed price contract at that time, also valid to 30 June 2015.
During the period to 31 March 2015, the parties will also agree to the capital cost for Trains 3 & 4, currently estimated at ~US$1 billion total for the two trains, and a timeline to fully implement the 8 mtpa MLNG Project at an estimated total cost of US$3.5 billion as summarised below:
Magnolia LNG Project Costs Summary Trains Cost US$ Billion 1 and 2 EPC – lump sum fixed price (70%) 1.391 1 and 2 EPC – provisional sum (30%) 0.595 Sub-total 1.986 3 and 4 EPC – estimated 1.014 Sub-total 3.000 1 to 4 Company costs 0.500 1 to 4 Total 3.500
LNGL Managing Director and Chief Executive Officer, Maurice Brand, said that based on the extensive FEED and costing work completed and with the open book nature of the SK E&C Group agreements, the final EPC capital cost is estimated at ~US$3 billion, with a total MLNG Project cost for the 8 mtpa project (inclusive of Company costs) estimated at US$3.5 billion. The Company first advised the estimated total cost of US$3.5 billion on 24 February 2014, and this capital cost estimate has been included in all documentation submitted to the Federal Energy Regulatory Commission (FERC) as part of MLNG’s filing currently being progressed with FERC.
“Based on recently reported data, MLNG remains at the very low end of capital costs on a per/tonne basis, when compared with other US LNG projects. The SK E&C costs reinforce the Company’s view that our business model of mid-scale, modular based LNG trains of 2 mtpa design capacity, incorporating the Company’s OSMR® LNG liquefaction process, is valid and provides for a sustainable long-term business that can be replicated in the future”, said Mr Brand.
MLNG’s Chief Operating Officer, John Baguley said, “I am pleased with the steady progress being made with the SK E&C Group as we work through all the EPC Contract and project related activities towards planned financial close in mid-2015. The period through to 31 March 2015, during which we will convert the Provisional Sum into a combined lump sum, fixed price contract valid to 30 June 2015, will position Magnolia LNG to immediately enter construction phase once all necessary approvals and licenses are received. This period will also allow us to incorporate any comments received from FERC as they prepare the Draft Environmental Impact Statement, and to undertake the rigorous planning and scheduling required to provide first LNG in 2018.
The SK E&C project schedule and budget through to 30 June 2015 remain on target.”
About Liquefied Natural Gas Limited
– Magnolia LNG, LLC, a US-based wholly owned subsidiary, which is developing the Magnolia LNG Project an 8 mtpa LNG export terminal, in Lake Charles, Louisiana, USA;
– Gladstone LNG Pty Ltd, a wholly owned subsidiary, which is developing the Fisherman’s Landing LNG (FLLNG) Project at the Port of Gladstone in Queensland, Australia; and
– LNG Technology Pty Ltd, a wholly owned subsidiary, which developed and owns the Company’s OSMR(R) LNG liquefaction process, a mid-scale LNG business model that plans to deliver: lower capital operating costs; faster construction; and improved efficiency, relative to larger traditional LNG projects.