Regional LNG: EWC, InterOil in 2-MTPA PNG LNG construction deal

Australia-listed firm Energy World Corporation Limited announced Wednesday that Liquid Niugini Gas Limited, a subsidiary of New-York listed firm InterOil Corporation, has signed a binding Heads of Agreement (HOA) with EWC to construct a two million tons per annum (mtpa) land-based LNG plant in the Gulf Province of Papua New Guinea (PNG).

The plant would process an estimated 1.5 trillion cubic feet (Tcf) of natural gas over 15 years with early stage capital expenditure estimates amounting to US$455 per metric ton of LNG production, EWC said in statement.

In return for its commitment to fully fund the plant, EWC is entitled to a fee of 14.5% of the proceeds from the sale of LNG from the facilities, subject to adjustments based on timing and execution. The HOA sets out the major terms and conditions which the parties have agreed shall be included in the Train 1 Funding and Shareholder?s Agreements, as well as the first expansion from 2mtpa to 3 mtpa, it said.

EWC will be responsible for the design, construction and commissioning of the captive 150MW combined cycle gas power plant and the final gas processing and liquefaction facilities based upon its standardised modular 500,000 ton per annum (TPA) trains. EWC will also be cooperator and co-marketer of Train 1 LNG facilities.

Infrastructure required for the project includes a jetty and breakwater for the LNG loading facility with expansion potential, and approximately 50 mile (80 Km) pipeline from the Elk and Antelope fields to the coast. The wells and processed natural gas transport from the condensate stripping plant (CSP) to the coast in the Gulf Province will be the responsibility of the owners of the Elk and Antelope fields, including InterOil and its upstream partners.

Definitive agreements are already under negotiation. The final investment decision is expected to be made by March 30, 2011, following completion of engineering and design work, financing and shareholder agreements, and further regulatory approvals.

The current schedule aims for these LNG facilities to be operational by late-2013 to coincide with the start-up of the proposed and previously announced CSP joint venture between Mitsui and InterOil.

Stewart Elliott, Chairman and Chief Executive Officer of EWC, commented, ?The agreement with InterOil enables us to enter into a fast-track development utilising our 500,000TPA modular LNG trains as part of our strategic objective to bring clean energy to Asia ? We are delighted to partner with InterOil and its upstream partners in this significant economic development for both PNG and the Gulf Province which will be complimentary to our previously announced Sengkang LNG project in Indonesia.?

Phil Mulacek, Chief Executive Officer of InterOil, commented, ?The addition of an early, mid-sized LNG project with Energy World provides great synergies with our proposed CSP with Mitsui as well as providing significant benefits to the people of the Gulf Province. In addition to enhancing the value of our Elk and Antelope resource, the Train1 LNG venture should provide significant cost benefits by minimizing natural gas reinjection and the transportation of condensate to the Refinery. We welcome Energy World as our Gulf Province LNG partner. This is a key step forward in the continuing process to monetize the Elk and Antelope resource.? (denny)