Arrow hopes buyout will push LNG project ahead
Sydney Morning Herald
Friday February 12, 2010
ARROW ENERGY is aiming to grab control of a liquefied natural gas project by buying out the share of its joint-venture partner, LNG Ltd, for $51 million.Arrow, which is behind the smallest of five rival projects vying to export liquefied natural gas in Queensland, will use cash and share options to fund the deal, which is designed to improve the project's chances of going ahead.LNG Ltd could earn up to $111 million more if the project passes several other milestones, including $24 million at a final investment decision slated for later this year.The payments to LNG Ltd will also include a royalty fee of up to 0.9 per cent, depending on oil costs, for gas from the first production unit, or "train".If oil prices were $US80 a barrel, these initial payments could equal $20 million a year with for a project of 1.7 million tonnes a year, or $51 million if production reached 3.5 million tonnes a year.The deal supersedes a previous arrangement under which Arrow, which owns the gasfields, received an equity stake in the planned gas-processing plant at Fisherman's Landing, at Gladstone.Arrow's chief executive officer, Nick Davies, said design and planning of the plant was "well advanced" before the final investment decision in the coming months."This further simplification of the Fisherman's Landing LNG development and the elimination of the commercial agreements with LNG Ltd will improve the ability to construct, finance and ultimately allow for greater flexibility in the plant," Mr Davies said.All five rival Queensland LNG projects aim to make a final investment this year, but analysts say consolidation between the rivals is likely thanks to a glut of gas supply in the region.Earlier this week, RBS analyst Jason Mabee said Arrow's project was the least likely to succeed of the five.Arrow shares rose 4 per cent to $3.54, while LNG shares surged 10 per cent to 76.5c.
© 2010 Sydney Morning Herald