EWC updates Sengkang LNG project
Monday, February 28 2011 - 01:44 AM WIB
Sengkang LNG Project
Of the proved reserves in our Sengkang Contract Area, approximately 243 BCF will be required to meet demand from BPMIGAS under the Gas Supply Agreement and any requisite extension thereto when the Sengkang Power Plant is upgraded to 315 MW as referred to earlier in this report. In addition, we have calculated that more than 2.25 TCF of prospective gas resources may be available in prospects which have been identified in the Sengkang Contract Area. in order to exploit these gas reserves and prospective resources, we are constructing an LNG facility and export infrastructure referred to as the ?Sengkang LNG Facility?, using our modular LNG train, on the South Sulawesi coastline, in the same region as our Sengkang Contract Area and Sengkang Power Plant.
The Sengkang LNG Facility will have a production capacity of 2 MTPA and combine four modular LNG trains, each with a production capacity of 0.5 MTPA. Production of LNG from the first two modular LNG trains was planned to commence in June 2010 has been delayed pending approval from BPMIGAS of a plan of development (POD) for the gas required for the LNG facility from the Sengkang gas field. First production will now likely occur 18 months after the approval by BPM1GAS of the POD. The remaining two modular LNG trains are planned to commence commercial production of LNG operation at quarterly intervals thereafter providing a total LNG capacity for the Sengkang LNG Facility of 2 MTPA.
We already have enough proved reserves for the first two units, thus sufficient to produce 1 MTPA of LNG for more than 5 years. By utilising existing gas reserves for this LNG production we plan to be able to use internally generated cash flow to finance the foreseen further gas field development in the Sengkang Contract Area. If development of gas resources justify (which cannot be known at the present time), we envisage expanding the capacity of the Sengkang LNG Facility up to 5 MTPA through a phased development of additional 0.5 MTPA modular LNG trains.
Our business strategy continues to be to expedite the construction of the Sengkang LNG Facility without the need to first prove up substantial gas resources in the Sengkang Contract Area or concluding long term off-take agreements with customers for our LNG This non-traditional approach to LNG development rests on the relatively lower cost of our Sengkang LNG Facility which will utilise our modular LNG train, compared to conventional large-scale LNG trains and our ability to finance this key project from cash flow generated from our operating business.
Total capital expenditure on the Sengkang LNG Project, to enable production of 2 MTPA of LNG is expected to be US$350 million which is expected to be financed from a combination of non-recourse project finance and the proceeds of our placement of shares in May 2008. We have mandated Standard Chartered Bank and Mizuho Bank as advisors for the financing of the Sengkang LNG Project.
On 25 July 2008, we entered into a loan facility with Mizuho Bank and Standard Chartered Bank for a US$60 million loan facility and letter of credit to finance capital expenditure for or in connection with the Sengkang LNG Project and related projects entered into by EEES and PTES, including but not limited to making payments to Chart.
The Ministry of Energy and Mineral Resources of Indonesia issued us with guidelines to obtain an operating licence for the Sengkang LNG Facility in November 2006. We are required, among other things, to satisfy certain conditions and obtain various other licences, permits and approvals as the Sengkang LNG Project proceeds and before an operating licence is issued. We are in the process of complying with these guidelines and these matters are proceeding satisfactorily the timing for the receipt of these approvals are also influenced by the approvals required from BPMIGAS for EEES to supply gas to the Sengkang LNG project and for the completion of a programme of gas infrastructure works, including an expansion of the Sengkang Gas Plant.
The electric power required for the Sengkang LNG Facility is expected to be generated by our Sengkang Power Plant by way of the approved 120MW expansion. We are in negotiations with PLN regarding this supply of electricity from the South Sulawesi electricity grid to the Sengkang LNG Facility which will require the construction of a 40 km transmission line connecting PLN?s Sengkang Switchyard at the Sengkang Power Plant with the Sengkang LNG Facility. (end of excerpt)