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  • MEO Australia Lines Up Potential Buyers For Methanol From Tassie Shoal Project 0 comments
    Feb 5, 2013 10:15 PM

    MEO Australia (ASX: MEO) has signed Letters of Intent with three preferred long term methanol buyers and is also in talks with a potential major partner and operator for its first Tassie Shoal Methanol Plant (TSMP1).

    While the LoI's are non-binding at this stage, they represent maximum total shortlisted demand that exceeds the total supply capacity from TSMP1.

    In addition, they provide the basis for the parties to further develop commercial terms for the sales and purchase of methanol from TSMP1 with a view to maturing these LoI's towards binding Methanol Sale and Purchase Agreements.

    The shortlisted buyers are major participants in the methanol market with a strong focus on expanding their Asian businesses.

    Discussions with interested parties on broader strategic partnerships across the value chain including the acquisition of equity in TSMP1 are also continuing with MEO now developing a commercial relationship with an Asian industry participant on a non-exclusive basis.

    The Asian multinational corporation has broad business interests including in upstream E&P, downstream chemicals and international trading businesses and is considering taking a majority interest in, and assuming operatorship of, the TSMP1 midstream development.

    "TSMP1 represents a globally competitive methanol manufacturing facility and an opportunity for shortlisted buyers and potential equity partners to be foundation participants," MEO executive manager business development Robert Zammit said.

    "As we mature the revenue side of the commercial supply chain and consider possible TSMP1 equity structures, we will sharpen our focus on the gas supply alternatives, including engaging with regional resource owners to present the TSMP1 development scenario for their consideration."

    Zammit also told Proactive Investors that at a realised price of US$350 per tonne of methanol, the TSMP1 project would generate export revenues for Australia in excess of A$600 million per year for a decade.

    Tassie Shoal Methanol Project

    TSMP combines established proven technology in an innovative way to produce methanol from high CO2 feedstock gas.

    This consists of a concrete gravity structure with topsides processing based on Davy Process Technology Steam Methane Reforming (SMR) technology.

    It also removes the need for expensive separation, transportation and geo-sequestration costs by designing for high CO2 in the feedgas stream.

    Each TSMP plant requires between 180 million and 210 million cubic feet of gas per day to enable production of 5,000 tonnes of methanol per day, or 1.75 million tonnes per annum.

    This feedstock gas could potentially be drawn from the many undeveloped gas resources in the region, many of which have high CO2 content.

    MEO has secured both Federal Government Environmental Approvals for two methanol plants to be located at Tassie Shoal as well as Major Project Facilitation status.

    TSMP is located at the shallow water Tassie Shoal close to many undeveloped gas fields in the region including the Blackwood and Heron discoveries in the nearby NT/P68 exploration permit as well as being about 400 kilomeetres MEO's 100% owned WA-454-P.

    The shallow waters allow facilities to be located on sea floor, avoiding floating complexities and motion issues while allowing construction to be carried out at low cost South East Asian sites.

    These factors make for attractive economic fundamentals with reports from major international engineering firms Davy Process Technology, WorleyParsons and Arup estimating that TSMP would have an overall capital expenditure of US$1.5 billion for the first 1.75 million tonne per annum (MMtpa) methanol plant including a 20% contingency.

    Analysis

    While still non-binding, the LoIs with the potential buyers is a significant step towards bringing the Tassie Shoal Methanol Project to reality.

    It also underscores its attractiveness as a development option for the high carbon dioxide fields in the area including ConocoPhillips' (NYSE: COP) Barossa and Caldita gas fields as well as the giant Evans Shoal discovery.

    While the fields have large gas resources, development efforts have been stymied by their high CO2 content - about 16% for Caldita and Barossa, 28% for Evans Shoal.

    Progress made on securing a major operating partner further highlights the project's potential and in the event that it proceeds, will significantly reduce MEO's development risks and funding requirements.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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