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Magnolia LNG developer unconcerned about 'perceived' FERC permitting delay

The developer of the Magnolia LNG export project told investors that a "perceived" delay in receiving approval to start construction will not keep the Louisiana venture from receiving a final funding decision.

With the project holding both a FERC certificate and an authorization to export, LNG Ltd. CEO Greg Vesey said, the Australian company and its potential buyers are not concerned that Magnolia LNG has not received a notice to proceed with construction from FERC, which requires engineering to be 100% complete before issuance. "I understand that some are concerned about our perceived delay in Magnolia LNG's FERC notice-to-proceed process," Vesey said March 31 in Australia on a call with investors and analysts. "I will remind you that our process to move to a final investment decision and financial close is based on factors other than the receipt of FERC's notice to proceed."

Vesey said the company is working with its engineering, procurement and construction contractor to answer questions from the commission on its filings for initial site preparation and he expects the first notice of what are typically several filings "in the near future."

"We have generally avoided aggressively expediting FERC," he said. "Based on our monitoring of FERC dockets, it is clear the priority is given to projects already in construction, and consequently we are confident that FERC will strongly support Magnolia LNG construction once we initiate this activity."

The company has estimated reaching a final investment decision in late 2017 or in 2018, depending on its progress with securing off-take agreements.

Magnolia LNG on Jan. 23 announced a nonbinding agreement with India's Vessel Gasification Solutions Inc. for about half the terminal's planned capacity. When asked whether the developer is concerned about a shift toward short-term contracts, Vesey said all of the potential buyers the company is engaged with would sign on for 20 years, the traditional length of LNG supply contracts.

"Frankly, it hasn't been a large pushback from the buyers community," he said. "We prefer the 20 years. It's what the lending community — the banking community — has seen before."

Magnolia LNG received FERC approval in April 2016 for the 8 million-tonne-per-annum liquefaction and export terminal near Lake Charles, La., and was given U.S. Department of Energy authorization in November 2016 to export to countries that do not have free trade agreements with the U.S. The Louisiana terminal would include four liquefaction trains, each with a nominal capacity of 2 mtpa. (FERC docket CP14-347, DOE docket 13-132-LNG)