Gladstone Fisherman's Landing LNG Project Update

abarrelfullabarrelfull wrote on 10 Jun 2012 13:34
Tags: australia lng

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The Directors of Liquefied Natural Gas Limited (ASX: LNG, Company) are pleased to provide an update on the Company’s wholly owned 3 million tonnes per annum LNG project at Fisherman’s Landing, in the Port of Gladstone, Queensland (LNG Project).
  • Following the presentation to Gladstone Ports Corporation Limited (GPC) of its gas supply plans and general update on the status of its LNG Project, the term of the Agreement for Lease (Agreement) between GPC and Gladstone LNG Pty Ltd (a wholly owned subsidiary of the Company), has been extended to 31 December 2012. The Agreement relates to the site for the Company’s planned LNG Project and:
  • specifies the conditions, including the procurement of gas supply for the LNG Project, which are required to be satisfied by 31 December 2012, following which Gladstone LNG Pty Ltd will have a further six months to satisfy any “remaining conditions”. These remaining conditions are primarily related to the obtaining of necessary approvals to recommence construction of the LNG Project;
  • includes, as an annexure, the agreed * definitive long term Lease (including all terms and conditions), to be executed by GPC and Gladstone LNG Pty Ltd, on satisfaction of the Agreement conditions. The Lease terms and conditions can only be varied by the mutual agreement of GPC and Gladstone LNG Pty Ltd; and
  • subject to satisfying the Agreement conditions (including applicable government approvals), provides Gladstone LNG Pty Ltd with a 30 year lease over the LNG Project site, with Fisherman’s Landing being the only mainland area in the Port of Gladstone designated for an LNG project.
  • The Company, with the active support of its major shareholder China Huanqiu Contracting & Engineering Corporation (HQC) and its controlling shareholder, China National Petroleum Corporation, is advancing agreements with gas suppliers for the delivery of gas to Wallumbilla; Callide or Ipswich in accordance with the Company’s gas supply and delivery plan. The Company’s proposed gas supply plan incorporates all of the following options:

Upstream Resource Purchase: The Company, and/or parties associated with the Company (Gas Partners), acquires its own gas resources and is responsible for the gas field development, as well as selecting an LNG buyer. The gas resource may be wholly owned or in a joint venture with other parties. The equity gas parties would either enter into their own LNG buyer arrangement or, more usually, agree to appoint a party as the Marketing Agent on behalf of the joint venture so the LNG is sold to one or more LNG buyers on behalf of the joint venture partners.

In relation to acquiring its own gas resources, the Company and its Gas Partners are continuing their due diligence investigations and discussions with Westside Corporation Limited (ASX:WCL) to explore potential transaction opportunities.

WCL has granted the Company and its advisors and financial backers due diligence access on a
non–exclusive basis. No definitive transaction terms or agreements have been concluded with
WCL and there is no certainty that any binding transaction will be agreed between the Company, its Gas Partners and WCL.

In addition to WCL, the Company has been in negotiation with two other parties in relation to
potential transaction opportunities focussing on the acquisition of their gas reserves and resource potential.

  • Tolling Service Agreement: A gas owner will arrange to deliver its own gas to the LNG Project and arrange its own LNG buyer. The Company receives a monthly capacity payment and tolling (processing) fee from the gas supplier to process, liquefy, store and deliver the gas, as LNG, onto LNG ships arranged by the LNG buyer. Negotiations are advanced with one gas supplier and progressing with another.
  • Gas Purchases Agreement: The Company purchases the gas at an agreed price and delivery point and arranges sale of the produced LNG to the Company’s selected LNG buyer(s). Negotiations are progressing with two gas suppliers under this type of agreement with a Key Commercial Term Sheet being advanced with one gas supplier.
  • The Company is continuing to progress all engineering, procurement and construction activities with HQC under an EPC Services & Open Book Conversion Contract (Contract). The Contract includes, as an annexure, an agreed EPC Contract Term Sheet, which will form the basis of a fixed price EPC Contract. The Contract scope of services now incorporates for each LNG train to be fabricated in China, in only 5 modules, and shipped directly to the LNG Project site at Gladstone. This will minimise site construction costs and assist to reduce the schedule to plant commissioning.

The Company’s primary focus in the immediate term will be to secure, by one or more of the abovementioned options, gas supply of at least 130 TJ/day (45 PJ/year), being the minimum gas requirement for the first LNG train to proceed to final investment decision. The Company will keep shareholders informed of any material progress in relation to its gas supply plan.

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