Liquefied Natural Gas Ltd (LNGLY) Magnolia LNG Executes EPC Contract with KBR SK JV
Perth, Australia (ABN Newswire) - Liquefied Natural Gas Limited (ASX:LNG) (OTCMKTS:LNGLY) (LNGL or the Company) is pleased to advise that its wholly owned subsidiary, Magnolia LNG LLC (Magnolia), has agreed a legally binding lump sum turnkey (LSTK) engineering, procurement and construction contract (EPC Contract) with the KBR-SKE&C joint venture (KSJV) in relation to the Magnolia LNG project (MLNG).
- EPC Contract LSTK cost of US$4.354 billion for four LNG trains and associated facilities
- EPC guaranteed production of 7.6 mtpa, or 0.8 mtpa greater than previous guidance
- The EPC Contract LSTK plant design utilises LNGL's patented OSMR(R) technology
- Installed capacity cost/tonne range of US$495 to US$544 based on final design at FID
- LNG plant fuel gas consumption of 8%, or 92% feed gas production efficiency guaranteed
- EPC Contract LSTK price is valid to 30 April 2016
The EPC Contract covers the engineering, procurement and construction of four LNG production trains with design capacity of 2 mtpa or greater each, two 160,000m3 full containment storage tanks, LNG marine and ship loading facilities, supporting infrastructure and all required post-FID approvals and licenses.
On 24 August 2015, MLNG announced selection of the Siemens Energy Inc. (Siemens) process compression and driver equipment. The increased power available from the Siemens equipment potentially enables higher final plant design capacity which, following completion of remaining engineering and analysis, will be confirmed prior to Final Investment Decision (FID). As a result, MLNG's per tonne EPC cost may reduce within the range of US$495/tonne - US$544/tonne based on the final installed capacity design.
The EPC guaranteed production totalling 7.6 mtpa for the four-train MLNG project will not change.
The KSJV also provided pricing on a reduced (three train) project scope. The take out cost for one train, estimated by KSJV at US$630 million, is subject to final confirmation by 31 December 2015.
Post-FID costs to commercial operations date in early 2019, which include owner's engineer, O&M mobilisation, insurance, commissioning gas, regulatory, other minor contracts, and capitalized overhead costs, are expected to range between 13.5% (US$585 million) and 15.5% (US$675 million) of the EPC Contract price. These estimates exclude capitalised interest during construction.
Equity and debt transaction costs, letter of credit fees, and financing costs will be determined at the time of FID, based on final terms agreed with BNP Paribas, lenders and equity providers.
Managing Director's Comments
LNGL Managing Director and Chief Executive Officer, Maurice Brand said, "We are pleased to announce the final lump sum turn-key EPC contract pricing details after significant efforts by the KSJV and the Magnolia project team, managed by MLNG's Chief Operating Officer, John Baguley. I want to thank the KBR and SKE&C leadership for their diligence and hard work on delivering the LSTK pricing. The total EPC capital cost in the range of US$495 to US$544 per tonne of LNG plant capacity (for the 8 mtpa or greater plant) establishes a new low for U.S. Gulf Coast projects and is substantially lower compared with recent LNG projects around the world (Figure 1, in link below)."
"With execution of the EPC contract in hand, we shall continue with final engineering activities but will not commit to out-sized, non-cancellable commitments in advance of execution of offtake agreements for at least 4 mtpa of additional sales," continued Brand.
"The EPC Contract costs agreed with KSJV reinforce the Company's view that our business model of mid-scale, modular based LNG trains of nominally 2 mtpa design capacity, incorporating the Company's OSMR(R) LNG liquefaction process is valid, providing a sustainable long-term business platform that can be replicated in future projects."
Revenue Sharing Agreement
For a period of up to 15 years following the declaration of commercial start date for each train, the KSJV may be eligible for annual revenue sharing payments ranging from $0 to $30 million across the four-train plant (maximum of about $0.07/mmBtu per annum). Annual amounts to be paid to the KSJV reflect a near linear inclining slope starting at $0 for production below 1.7 mtpa up to $30 million for production over 2.0 mtpa, with all annual payments based on actual LNG production achieved in a year reflected on a per train average across the 8 mtpa or greater liquefaction plant.
The revenue sharing arrangement, associated with KSJV's support of the initial scaled commercialisation of LNGL's OSMR(R) technology and construction approach, when combined with operating and other costs across the 8 mtpa or greater plant is expected to approximate $0.50/mmBtu. The target cost amount of $0.50/mmBtu represents the estimated operating cost implicit in the unchanged EBITDA guidance of approximately $2.50/mmBtu across the four train project.
"We are delighted to work with Magnolia LNG on this ground-breaking project for more innovative, cost effective, efficient and greener LNG," said Stuart Bradie, KBR President and CEO. "KBR's long history of success in global LNG, ammonia and plant modularization make us a natural fit for this exciting project and we are pleased to have the opportunity to bring our unique skills, together with our self-perform construction capability and outstanding safety record, to create exceptional value for MLNG," continued Bradie.
Conference Call Details:
LNGL invites shareholders to join a conference call about this ASX release with Maurice Brand (Managing Director and CEO of LNGL), Michael Mott (Chief Financial Officer of LNGL) and John Baguley (Chief Operating Officer of Magnolia LNG) at 9.00am (AEDT) on Monday (today) 16th November 2015 which is Sunday 15th November at 4:00 pm (US-CST).
Conference call (toll free) numbers are as follows:
Australia: 1800 123 296 or +61 2 8038 5221
Canada: 1855 5616 766
China: 4001 203 085
Hong Kong: 800 908 865
India: 1800 3010 6141
Japan: 0120 477 087
New Zealand: 0800 452 782
Singapore: 800 616 2288
United Kingdom: 0808 234 0757
United States: 1 855 293 1544
After dialling the conference call number above, please then enter:
CONFERENCE ID: 8006 0604.
To view the release, please visit:
About Liquefied Natural Gas Ltd:
Limited Natural Gas Limited (LNGL) (ASX:LNG) (OTCMKTS:LNGLY) is an ASX listed company focused on development of mid-scale LNG plants. LNGL's business strategy aims to deliver lower capital and operating costs, faster construction timelines and improved efficiency, relative to larger traditional LNG projects. LNGL's portfolio includes 100% ownership in Magnolia LNG LLC, Bear Head LNG Corporation, Gladstone LNG Pty Ltd, and LNG Technology Pty Ltd, which owns and develops the OSMR(R) LNG liquefaction process.
Liquefied Natural Gas Ltd
Mr. Maurice Brand
Managing Director & CEO
Mr. David Gardner
Mr. Mike Mott
Chief Financial Officer
Liquefied Natural Gas Ltd
Source: ABN/Asia Business Newswire
(November 15, 2015 - 5:16 PM EST)
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