Magnolia LNG: Fully de-risked and ready to go

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John Baguley, Chief Operating Officer, LNG Limited
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The Magnolia LNG (MLNG) project is an 8 mtpa, four train liquefaction project to be built on an existing LNG shipping canal in the Port of Lake Charles, Louisiana USA. The project is “construction ready” with all permitting, design, contracting and equity arrangements in place to enable construction to start immediately upon finalization of LNG offtake agreements. The project is fully de-risked and ready to proceed.

The site sits on the Industrial Canal serviced by the Calcasieu River waterway, a proven LNG shipping pathway that has been utilized for LNG import services for more than 35 years. The MLNG site is on industrial property within the Port of Lake Charles, readily accessible to the Gulf of Mexico, and far enough inland to protect it from seasonal storms. The site itself is elevated at 30 feet, well above the area storm surge levels providing natural protection against flooding and storms.

MLNG has absolute regulatory certainty. The project is fully permitted, and holds its U.S. FERC Order authorizing the siting, construction and operation of the facility, the FERC “final order” following statutory appeals processes, and the FERC Notice to Proceed authorizing the commencement of construction works at the site. MLNG also holds U.S. Department of Energy Free Trade Agreement

(FTA) and Non-Free Trade Agreement (Non-FTA) licenses to export the full capacity of the facility anywhere globally. MLNG holds all associated permits (US Coast Guard, US Army Corp of Engineers, Air Permit, Water Permit) necessary to enable construction.

The MLNG project design work is fully completed with the Front-End Engineering Package completed by leading global LNG Engineering, Procurement, and Construction (EPC) contractor KBR, working in conjunction with SK E&C USA. Early EPC works have also been completed including HAZOP reviews and the initial 3D plant model review. The process refrigeration compressors (ammonia compressors, mixed refrigerant compressors), their associated drivers and the feed gas booster compressors for the first two trains have been pre-purchased from Siemens. The liquefaction cold boxes and brazed aluminum heat exchangers for the first two trains have been pre-purchased from Chart Industries. All equipment design is complete, and piping, steel, civil, electrical and instrumentation initial bulk material quantities have been established. The design status is sufficiently mature to allow all equipment and most materials to be purchased within the first 3-5 months of EPC start.

The EPC commissioning and start-up contract has been finalized and signed with the joint venture KSJV (KBR and SK E&C). This contract is complete with the validity extending on six-month intervals. The EPC contract includes an agreed lump sum turnkey (LSTK) project price, inclusive of everything necessary to take the site from the current greenfield condition into a fully operational and performance tested LNG facility. This includes all detailed engineering, design, procurement, fabrication, shipping, installation, construction, commissioning and start-up works.

Magnolia LNG accesses natural gas supply via a Precedent Agreement with the existing Kinder Morgan Louisiana Pipeline (KMLP), which interconnects with pipeline supplies originating in the Marcellus and Utica Shales as well as supply delivered from the Henry Hub. Additionally, the pipelines upstream of MLNG interconnect with pipelines that access the Haynesville, Perryville, SCOOP and STACK production areas. The KMLP traverses the southern boundary of the Magnolia site property, eliminating the need for any new pipeline construction.

Magnolia LNG is targeting a traditional project financing structure. The full project equity, up to USD $1.5 billion, has been arranged through Stonepeak Infrastructure Partners. Limited equity participation can be offered to offtake parties as an option. A consortium of lenders will provide the debt portion with the project targeting a range of 75/25 to 70/30 debt/equity ratio. MLNG intends to meet the criteria required for the project to be viewed as investment grade.

Magnolia LNG is the leading U.S. Gulf Coast LNG export project with a final investment decision expected following finalization of agreements with credit-worthy offtakers.

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Image courtesy of LNG Limited