LNG, SKEC Ink MOU to Establish Technology JV for Gladstone Project

The Directors of Liquefied Natural Gas Ltd. signed a Technology Memorandum of Understanding with SK Engineering and Construction (SKEC), in relation to the Company's "Optimized Single Mixed Refrigerant" (OSMRTM) LNG processing technology (Australian Patent Application No. 2007903701).

The Agreement provides the framework for SKEC and the Company to establish a technology joint venture, owned 50% each, to:

  • Complete the final design of the OSMRTM process technology for inclusion in the Gladstone LNG Project front end engineering and design (FEED) package being undertaken by SKEC, under the Engineering and Construction Service Contract signed earlier this month.
  • Licence the OSMRTM process technology to the Gladstone LNG Project and provide a joint and several process guarantee.
  • Collaborate in the pursuit of other opportunities to market and commercialise (licence) the OSMRTM process technology.
  • Collaborate in the development, marketing and commercialisation of other LNG processing and related technology.

The Company's Managing Director, Maurice Brand, said that "the Agreement was the result of a comprehensive review of the OSMRTM process technology by SKEC and is a logical and complimentary extension of the existing relationship between SKEC and the Company in relation to the Gladstone LNG Project. The Agreement also lays the foundation for SKEC and the Company to collaborate on other LNG project opportunities."

Representatives of SKEC were in Queensland this week to:

  • Further the proposed engineering, procurement and construction (EPC) consortium with Laing O'Rourke Australia Construction Pty Ltd (LOR). As previously reported LOR and the Company signed a Pre-Construction Services Agreement, dated 27 March 2008, primarily in relation to the LNG storage tank selection and FEED. SKEC and LOR, under the consortium, will merge their resources to provide the overall FEED, detailed engineering and pre-requisite construction services for the Gladstone LNG Project, through to the financial close;
  • Sign the aforementioned Agreement; and
  • Visit the Gladstone LNG Project site at Fisherman’s Landing, Port of Gladstone, Queensland.

SKEC's Vice President, Yang-Kyoo Ju, said "SKEC is 100% committed to the Gladstone LNG Project and excited at the opportunity to participate in this leading edge LNG project. Not only is it likely to be the first coal seam gas to LNG project in the world but with the application of the OSMRTM process technology it has the potential to set new industry benchmarks as to plant cost, efficiency and carbon emissions."

"SKEC already has a successful working relationship with LOR and the SKEC-LOR consortium provides the experience and competencies necessary to deliver this world class LNG project," Yang-Kyoo Ju further said.

The execution of the Agreement represents another major milestone for the Gladstone LNG Project in recent times; including:

Licence Agreement: Between Gladstone Ports Corporation Limited and Gladstone LNG Pty Ltd, which:

  • Allocates the front area at Fisherman’s Landing, Port of Gladstone, Queensland, Australia for the Gladstone LNG Project; and
  • Provides the framework and target dates for the negotiation of a number of Port Agreements such as lease arrangements, commercial port user agreements, dredging and wharf modification and other relevant services, subject to a number of pre-conditions, including GPC Board and Shareholding Minister approvals.

Gas Supply: Arrow Energy Limited's July 31, 2008 announcement of a major increase in its 2P gas reserves, including uncommitted gas reserves available for the Gladstone LNG Project, and expectation of another material increase in 2P gas reserves by the end of this year. Engineering and Construction: Execution of an Engineering and Construction Services Contract with SKEC and Pre-Construction Services Agreement with LOR, who will now combine resources to provide the overall FEED, detailed engineering and pre-requisite
construction services for the Gladstone LNG Project, with the intention of entering into a bankable EPC contract as the Gladstone LNG Project moves from the pre-construction phase to the construction phase.

Environmental Approvals: As announced earlier this month, the Company submitted its Environmental Impact Statement to the Environmental Protection Agency of Queensland. A significant step forward in the environmental approvals process for the Gladstone LNG Project and is a prerequisite to obtaining a number of licenses and approvals that the Company will require in early 2009, to achieve financial close and commence construction.

LNG Offtake: The Company has received detailed LNG offtake and Project investment proposals from several interested LNG buyers. All shortlisted LNG buyers are of a bankable credit standing and have existing LNG purchasing and trading activities, together with access to LNG ships. Final LNG buyer selection is expected during the September 2008 quarter.