El Paso Finalizes Snohvit Purchase Agreement
El Paso Global LNG announced that the definitive liquefied natural gas (LNG) purchase and sale agreement signed in October 2001 with a consortium of natural gas production companies led by Statoil ASA received final Norwegian and United States government approvals on May 31, 2002.
The consortium will develop the Snohvit Project in northern Norway and provide El Paso with an annual delivery of approximately 1.8 million tons of LNG during the 17-year primary term of the agreement. This agreement will account for more than 40 percent of the total capacity to be produced at the Snohvit Project's LNG liquefaction facility, which will be located on Melkoya Island, just north of Hammerfest, Norway.
The consortium will be responsible for developing the proven reserves that support this project, including constructing the pipeline infrastructure and liquefaction facilities, and making all necessary LNG shipping arrangements. El Paso will receive LNG shipments equivalent to an estimated 91 billion cubic feet per year of natural gas beginning in 2006. The shipments will be delivered to the existing Cove Point, Maryland LNG regasification terminal, or to other North America and European destinations where the LNG will be regasified and sold as natural gas. El Paso has the capacity at Cove Point to deliver about 250 million cubic feet per day of natural gas into the East Coast pipeline infrastructure.
"We are extremely pleased with the efforts of the consortium in obtaining the approvals which now bring this contract to fruition," said Greg G. Jenkins, president of El Paso Global Petroleum and LNG Group. "This approval advances El Paso's LNG business in important ways. The contract provides both security of supply and destination flexibility, which we believe are important elements of the evolving LNG marketplace. We are confident in our ability to fill the entire capacity at the Cove Point terminal, and are well prepared to market additional supply if the consortium decides to expand the liquefaction facility."