QP, ExxonMobil and Edison sign final deal for LNG terminal

May 02, 2005 02:00 AM

Major milestone agreements were announced by Qatar Petroleum, ExxonMobil and Edison for the Isola di Porto Levante LNG terminal to be located offshore the coast of Italy in the North Adriatic Sea.
The terminal, scheduled for start-up by year-end 2007, will have a regasification capacity of 8 bn cmpy. The state-of-the-art facility will be a key component in providing dependable supplies of natural gas to the Italian energy sector to meet the country's growing demand.

The Isola di Porto Levante terminal owners have secured all the primary authorizations for construction and operation from the Italian government and European Union Commission. A contract to Aker Kvaerner for development of the gravity-based structure (GBS), LNG storage tanks and LNG off-loading and regasification facilities was awarded. In addition, Snamprogetti, an ENI affiliate, will be the contractor for the pipeline associated with the project.
The terminal will be located approximately 15 km (9.3 miles) from the Veneto coast and positioned in about 30 meters (98 feet) of water. The concrete GBS will be constructed onshore, towed to the site and positioned to create an artificial island. The LNG storage tanks, which will be designed using ExxonMobil's proprietary modular tank technology, will be positioned inside the GBS and have a total storage capacity of 250,000 cm.

The terminal will be equipped with a berthing/mooring system for product unloading, designed to accommodate ships delivering up to 152,000 cm of LNG. Delivery frequency is anticipated to be an average of two ships a week.
In addition to Qatar Petroleum, ExxonMobil and Edison progressing plans to construct and operate the Isola di Porto Levante terminal, Qatar Petroleum and ExxonMobil are making a number of upstream investments associated with the project. These include a wellhead platform with an expected seven wells, pipelines, a 4.7 mm tpy LNG train at Ras Laffan City and five conventional LNG tankers to supply the new LNG terminal.

His Excellency Abdullah bin Hamad Al-Attiyah, Second Deputy Premier and Qatar Minister of Energy and Industry, said: "The progression of the Isola di Porto Levante LNG terminal is a major achievement that is designed to provide Italy a significant additional source of natural gas which will strengthen the country's regional and national economic competitiveness and diversify its sources of energy supply.”
“A project of this size and complexity is only possible through the excellent working relationship that exists between Qatar Petroleum and ExxonMobil, and our partner in this venture, Edison. I thank those in the Italian government and the European Union Commission who have worked diligently in support of the Isola di Porto Levante LNG project, which will create employment opportunities for Italy and the region, and provide a secure energy supply for continued economic growth."

Stuart McGill, Senior Vice President of ExxonMobil, said: "The terminal will be built and operated using the most advanced technology employing the highest international design, construction and safety standards. We appreciate the commitment on the part of the Italian Government and all other stakeholders in advancing this state-of-the-art project."
"The Isola di Porto Levante will be the first Italian LNG infrastructure of this size and it represents an important milestone in the long/medium term Edison strategy," said Umberto Quadrino, Edison's Chairman and CEO. "Edison will retain 10 % ownership of this facility but will be its principal user, having access to about 80 % of its total regasification capacity. Starting by year-end 2007, we will be able to rely for 25 years on the delivery of about 6.4 bn cmpy of natural gas, an amount that will go a long way in meeting Edison's supply needs and helping it achieve its growth objectives. In addition to strengthening Edison's competitiveness, it will make a significant contribution to diversifying the sources for Italy's energy supply while increasing its flexibility and safety, and preserving the environment."

The announcements evolve from a November 2003 Heads of Agreement between Qatar Petroleum, ExxonMobil and Edison, whereby affiliates of both Qatar Petroleum and ExxonMobil would acquire 90 % interest (Qatar Petroleum affiliate 45 %; ExxonMobil affiliate 45 %) in the Edison company (Edison LNG) that will develop the terminal project, and a Sales and Purchase Agreement between the Ras Laffan LNG Company (II), RasGas (II) (a joint venture between Qatar Petroleum and ExxonMobil), and Edison for the delivery of LNG supplies.
As a result of these agreements, Edison LNG will change its name to Terminale GNL Adriatico. Some 80 % of the terminal capacity will be allocated for 25 years to processing LNG imported under the RasGas(II)-Edison Spa, with the remaining 20 % capacity available to users through regular transparent procedures.

The gas for the project will be sourced from Qatar's giant North Field, which has recoverable resources of more than 900 tcf of natural gas. As a result of the agreement, Edison received EUR 9.95 mm for the sale of 90 % of Edison LNG and waived a receivable owed by Edison LNG amounting to EUR 10.79 mm. Edison has confirmed this sale will not have a material operating or financial impact on Edison's financial statements.
On Dec. 31, 2004, Edison LNG net equity capital amounted to EUR 7.9 mm.

With regard to Edison LNG, the parties also agreed that:
-- All parties will be barred from selling their interests in Edison LNG for 36 months from the date the terminal begins operations, but not beyond July 1, 2011 (Lockup Clause);
-- Edison will have the right to buy back the 90 % interest in Edison LNG or sell its 10 % interest if events preventing the construction of the terminal were to occur due to causes attributable to the majority partners (Put and Call Clause);
-- The two majority partners will have the right to buy Edison's 10 % interest if the gas supply contract with RasGas II were to be terminated for reasons attributable to Edison(Call Clause);
-- In the event either a put or call clause is exercised, the price of the equity interest affected will be determined based on the company net equity capital at the time of exercise.
-- The parties are committed -- pro quota -- to financially sustain the investment.

In this transaction Qatar Petroleum and ExxonMobil have been advised by Allen & Overy, and Edison by Freshfield Bruckhaus Deringer.

Source: ExxonMobil Corporation
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