Rick Wilkinson
OGJ Correspondent
MELBOURNE, Feb. 11 -- Arrow Energy Ltd., Brisbane, is to buy the proposed Fisherman’s Landing LNG plant to be built in Gladstone, Queensland, from its project partner Liquefied Natural Gas Ltd., Perth, for $168 million (Aus.).
This figure includes an up-front payment of $51 million in cash and options. The plant is to be fueled from Arrow’s coalseam gas fields in the Surat-Bowen basins to the west.
The acquisition comes just a month after Arrow signed a deal giving it ownership of the first LNG train at the plant and supersedes this earlier agreement.
Arrow says the new deal is a further simplification of the Fisherman’s Landing LNG development and the elimination of the commercial agreements with LNG Ltd. It will improve the ability to construct, finance, and ultimately allow for greater flexibility in the operation of the plan.
The acquisition price includes $45 million for reimbursement of project costs incurred to date, an initial $5.7 million licensing fee for the use of LNG Ltd.’s trademarked optimized single-mixed refrigerant (OSMR) liquefaction technology, and a grant of 12.5 million options exercisable at $3.50 each, which expire May 14.
Arrow will pay LNG Ltd. a minimum royalty of 0.7% calculated on the oil price differential above $60/bbl (US) for the first train. A higher royalty of 0.9% will be payable if capital expenditure for the project is materially lower than current estimates of $2.1-2.2 billion (Aus.).
Further payments will be required to LNG Ltd. when certain milestones in the project are reached. These include $24 million (Aus.) at final investment decision, an additional $5 million (US) licensing fee at FID, $24 million (Aus.) when the plant produces 1 million tonnes of LNG a year, and $63.5 million (Aus.) when the plant reaches 3 million tonnes/year of LNG production through a second train.
Arrow will now reassess the feasibility of the original Mar. 31 final investment decision date although first production is still scheduled for late 2012.
For its part LNG Ltd. will come out of the completed deal with $85 million (Aus.) cash, 12.5 million Arrow options, and no further commitments for Fisherman’s Landing work. This will allow the company to focus on marketing its OSMR technology and other midscale LNG opportunities.