Golar, LNG Ltd Ink Preliminary Deal For Gladstone CSG Plant
BEIJING -(Dow Jones)- Golar LNG Ltd. (GLNG) said Friday it has signed a preliminary deal to develop a $500 million plant at the port of Gladstone in Queensland, Australia, to turn coalbed methane into liquefied natural gas for export.
Golar said it would take a 40% stake in the plant, which has a planned capacity of 1.5 million metric tons a year, and buy all the LNG under the terms of a Heads of Agreement signed with Liquefied Natural Gas Ltd. (LNG.AU), or LNG Ltd.
First production is scheduled for 2012, and talks were underway to sell the LNG output to a customer, Bermuda-based Golar said, adding that cargoes would use up to two of its existing LNG carriers.
"The Gladstone project has the potential to materially enhance the earning capacity and profile of the company," Golar Chief Executive Gary Smith said in a statement.
A string of multibillion dollar deals over the past 18 months have ignited interest in Australia's coal seam gas sector, with up to five LNG processing plants earmarked for construction at Gladstone.
Among the companies vying to build plants at Gladstone are BG Group (BG.LN), Santos Ltd. (STO.AU), and Arrow Energy Ltd. (AOE.AU). Origin Energy Ltd. (ORG.AU) and U.S. oil producer ConocoPhillips (COP) also want to build an LNG plant at the port.
Analysts say consolidation of plants may be inevitable to enhance economies of scale, particularly given the tough environment for raising funds.
In its statement, Golar said coal seam gas for its proposed plant will be sourced from Arrow Energy's fields in central Queensland.
Arrow has the option to take a 20% equity stake in the project, with LNG Ltd. holding the remaining 40% interest.
"Golar anticipates that, in addition to financing to be raised at the project level, it will also be able to raise financing in connection with the offtake arrangements and thereby limit the requirement for new equity that may be required by Golar LNG," Golar said.
Maurice Brand, managing director of LNG Ltd., said Golar had been picked from a number of companies participating in the project tender.
"The benefits of the Golar LNG proposal were compelling and the company's directors considered that, in these challenging financial times, the Golar LNG proposal package would deliver the best outcome for the company and materially assist with first LNG delivery in late 2012," Brand said in the statement.
-By David Winning, Dow Jones Newswires; 8610-65885848; david.winning@dowjones.com
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