Houston-based Marathon Oil Corp., the Equatorial Guinea government and the national oil company of Equatorial Guinea, Compania Nacional de Petroleos de Guinea Ecuatorial (GEPetrol), said last Tuesday they have finalized all the agreements for the companies’ Equatorial Guinea liquefied natural gas (LNG) project that would target deliveries to Lake Charles, LA.

This marks the final investment decision for the LNG project, which is expected to be completed and begin shipping first cargoes of LNG in late 2007 — a record-setting pace from project inception to first delivery of LNG, Marathon Oil said.

The project will be one of the lowest-cost LNG operations in the Atlantic Basin with an all-in LNG operating, capital and feedstock cost of approximately $1/MMBtu at the loading flange of the LNG facility, according to Marathon.

Marathon, through a wholly-owned subsidiary, said it is funding 75% of the LNG project, while GEPetrol is financing the remaining 25%. Marathon Oil and GEPetrol said they have received expressions of interest from a number of other companies about acquiring an equity interest in the LNG project.

Natural gas for the project will be purchased from the Alba field participants — Marathon, Noble Energy Inc. and GEPetrol — under a long-term gas supply agreement, and 3.4 million metric tons per year of LNG will be sold to BG Gas Marketing Ltd., a unit of BG Group Inc., under a 17-year purchase and sale agreement beginning in late 2007.

BG Gas indicated it intends to target the Lake Charles import terminal as the primary destination for the LNG, Marathon said. However, the agreement provides destination flexibility for the LNG, enabling BG Gas to take advantage of prevailing market conditions at other import destinations around the world.

Key facilities at the Equatorial Guinea LNG plant will include refrigeration systems, compressors, condensers, two LNG storage tanks and marine facilities that will allow for the berthing, mooring and loading of LNG ships ranging in size from 90,000 to 160,000 cubic meters of both membrane and spherical design, Marathon said.

Construction costs are estimated to be approximately $1 billion or an equivalent of about $260 per metric ton of installed capacity, the Houston energy company said. Additional costs for the project (project management costs, contingency, working capital and taxes, et al.) will come to about $400 million.

Preliminary construction work on the plant began in December 2003, and the work is progressing on schedule, Marathon said.

The Alba field holds an estimated remaining gross risked recoverable resources of 4.4 Tcf of natural gas, of which approximately 3 Tcf is expected to be produced through the LNG facility under the contract with BG Gas, along with 400 million barrels of liquids, according to Marathon. At the end of 2003, Marathon’s proved reserves in Equatorial Guinea totaled more than 315 million barrels of oil equivalent.

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