Australia's LNG Ltd. reached an agreement to push back the deadline for finalizing a deal for its proposed Magnolia LNG LLC export terminal in Louisiana to supply 2 million tonnes per annum of LNG to support a gas-to-power project in Vietnam, the company said Oct. 11.
The initial agreement, announced Sept. 15 between LNG Ltd. and Delta Offshore Energy, called for the companies to finalize a 20-year sale and purchase agreement by the end of October and for LNG Ltd. to close on the financing needed for Magnolia LNG by the end of the year. Under the amended deal, the companies plan to negotiate a definitive binding sale and purchase agreement by May 31, 2020. LNG Ltd. would also have until Aug. 31, 2020, to reach a final investment decision, although both of those dates could be extended.
"We feel that the extensions will provide [LNG Ltd.] and Delta Offshore Energy with more than adequate time to finalize terms for what will be the first long-term sale and purchase agreement for LNG to Vietnam," LNG Ltd. CEO Greg Vesey said in a news release.
The deal would see Magnolia supply LNG to Delta Offshore Energy, which would then use the LNG to fuel a 3,200-MW combined-cycle power plant. That plant would deliver power generation to Bac Lieu province under a power purchase agreement. The planned infrastructure in Vietnam also includes an LNG import terminal.
LNG spokesman Micah Hirschfield said in an interview that the timing of reaching a firm agreement still primarily depends on government officials in Vietnam signing off on the power project, but LNG Ltd. expects that to happen soon. Sale and purchase and power purchase agreements would follow.
"We absolutely feel confident in the ability to get it done," Hirschfield said. "We are well down the road with Delta on the [sale and purchase agreement]."
LNG Ltd. sees the deal providing a much-needed boost for Magnolia LNG because it would cover about one-third of the capacity that the project needs to contract before making a final investment decision.
Magnolia LNG has struggled to reach a final investment decision despite having an engineering, procurement and construction contract, all regulatory permits, and an offer of LNG production capacity that is a bargain compared to many peers. A previous supply deal with another counterparty lapsed.
The four-train terminal would be capable of producing about 8 mtpa of LNG, but LNG Ltd. plans to boost that capacity to 8.8 mtpa of LNG, pending approval by the Federal Energy Regulatory Commission.
Vesey said in a Sept. 18 interview that it could be 2020 before LNG Ltd. can build enough commercial support to commercially sanction Magnolia LNG. He pointed to the ongoing trade war between the U.S. and China as affecting its commercial efforts, along with other factors including a warmer-than-average winter and depressed LNG prices.
"Could it happen this year? Yes," Vesey told S&P Global Market Intelligence and S&P Global Platts at the Gastech conference in Houston. "If I'm a betting man, it's probably going to spill over into next year, because I just don't think things will get settled that quickly."
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