(MENAFN- ProactiveInvestors)
(ASX: LNG; OTC ADR: LNGLY) has executed a Memorandum of Understanding with Kellogg Brown & Root and SKEC relating to engineering procurement and construction of its Magnolia LNG Project in Louisiana.
Kellogg Brown & Root and SKEC will form a 70/30 joint venture to deliver the 8 million tonne per annum project.
Magnolia LNG remains on schedule for Financial Close in mid-2015 and first LNG in the fourth quarter of 2018.
The MoU follows the execution of a Technical Services Agreement with SKEC in March 2014 and a subsequent Technical Services Agreement with KBR that was announced on 5th January.
“The execution of the MOU with KBR and SKEC was a further positive step towards the formation of the EPC JV that will provide the “EPC Wrap” that is required by both project lenders and equity participants” managing director Maurice Brand said.
“The EPC JV structure is common in the LNG industry with each participant able to provide their experience and expertise.
“KBR is a well-credentialed LNG EPC contractor and will provide the Project Director and access to the full global resources of the KBR group. This will be particular relevant as Magnolia LNG moves to commit to the full 8Mtpa.”
MLNG chief operating officer John Baguley added his team looked forward to working with KBR in their joint venture with SKEC.
“During the period through to financial close we will be working to incorporate any comments received from FERC during their preparation of the Draft Environmental Impact Statement and to undertake the necessary rigorous planning and scheduling required to support achieving first LNG in the fourth quarter of 2018.” Baguley said.
EPC Joint Venture
Under the Technical Services Agreements the parties will complete all due diligence in relation to technical commercial and contractual matters.
This will enable the EPC JV to execute a lump sum turnkey engineering procurement construction commissioning start-up and performance testing EPC Contract for the LNG plant.
Magnolia LNG has set the following milestone schedule:
- JV Agreement between KBR and SKEC February 2015;
- Initialling EPC Contract between Magnolia LNG and the JV March 31 2015; and
- EPC Contract signing between Magnolia LNG and JV April 2015.
SKEC has already initialled the EPC contract which incorporates all requirements stipulated by BNP Paribas Magnolia’s project finance adviser Merlin Advisors LLC the lenders’ technical consultant legal advisors White and Case and Stonepeak Partners LLC the proposed Magnolia LNG Project Equity partner.
Magnolia LNG does not expect any material changes to the EPC contract.
The initial $1.986 billion lump sum turnkey contract covers the initial 4Mtpa LNG installation comprising:
- Two LNG trains each with a LNG design capacity of 2Mtpa;
- Two 160000 square metre storage tanks;
- A jetty and ship loading facility and related infrastructure; and
- All required approvals and licenses for the full 8Mtpa project.
The contract price includes a lump sum fixed price of US$1.391 billion valid through 30 June 2015 and a provisional sum of US$595 million representing 30% of contract value.
Total capital costs are estimated at US$3.5 billion or US$440 per tonne for the 8Mtpa project
Magnolia LNG
Magnolia LNG located along the Calcasieu River near Lake Charles is planned as a 8 million tonne per annum (Mtpa) liquefied natural gas export project comprising of four liquefaction trains each capable of producing up to 2Mtpa of LNG (1.7Mtpa firm).
This will use LNG Limited’s OSMR® LNG process technology with the company adopting a tolling business model whereby Magnolia LNG will provide liquefaction storage and ship loading facilities to LNG buyers who pay a monthly fixed capacity fee plus all LNG plant operating and maintenance costs.
The LNG buyers are also responsible for the supply and transportation of gas to the project site.
LNG Limited has tolling agreements covering 7Mtpa of the project’s planned 8Mtpa capacity and is currently focused on converting the first 4Mtpa to binding status in the first half of 2014.
The U.S. Federal Energy Regulatory Commission has formally accepted its filling application for Magnolia LNG with all approvals expected during 2015 in time for financial close in the middle of the same year.
A final investment decision will be made in late 2014.
The 117 acre site has minimal marine investment and is well positioned to provide LNG ship access.
MLNG previously entered into a 20 year legally binding pipeline capacity agreement with Kinder Morgan Louisiana Pipeline LLC (KMLP) to deliver gas to site for the full 8Mtpa of the project through its existing and underutilised pipeline on site.
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