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Liquefied Natural Gas Ltd Files For U.S. Gas Export Licence To Bear Head LNG

Liquefied Natural Gas Limited (ASX:LNG) has filed an application with the U.S. Department of Energy (DOE) for the export of natural gas to its Bear Head LNG Project in Canada.

Under the DOE application, the company is seeking long-term, multi-contract authorisation to export up to 503 billion standard cubic feet of gas per year by pipeline to Canada for a 25 year period.

This is the first of the various applications Bear Head LNG and Bear Head USA anticipate filing with DOE to enable the export of LNG from the project to free trade agreement (NASDAQ:FTA) and non-free trade agreement (Non-FTA) nations.

Bear Head LNG and Bear Head USA are wholly-owned subsidiaries of LNG Ltd.

The Bear Head LNG project is expected to have initial LNG production capacity of 8 million tonnes per annum.

It is being developed on a site that was partially developed for a LNG import terminal and then maintained in hot idle status.

"With all of Bear Head LNG's major Canadian approvals in place or moving through the regulatory process, we are on schedule to begin commercial operation in late 2018 to early 2019," Bear Head LNG chief operating officer John Godbold said.

Bear Head LNG chief financial officer Ian Salmon added the export facility's development schedule aligns with the projected ramp-up of natural gas production from U.S. supply basins, including the Appalachia basin.

Bear Head LNG may also access supplies of natural gas from Eastern Canada.

"We have a comprehensive and robust plan for gaining access to natural gas supply," Salmon said.

Bear Head LNG

The Bear Head LNG project is located on the deep, ice‐and dredge free waters of the Strait of Canso in Point Tupper, Richmond County, Nova Scotia.

It is being developed on a 255‐acre site comprising industrial‐zoned land (180 acres) and deep‐water acreage (75 acres).

In August, LNG Ltd acquired the project from Anadarko Petroleum Corporation (NYSE:APC) for US$11 million, giving it a second North American LNG project that expands and diversifies its development pipeline.

Prior owners had spent more than $100 million to design, and complete engineering work and site construction of the Bear Head LNG site in the early to mid 2000's.

The project already has 12 permits in place to build an LNG facility.

These include an approved environmental assessment; permits to construct a gas plant facility from both the Department of Natural Resources and the Nova Scotia Utility and Review Board; and a Development Permit from the municipal government in Richmond County.

Bear Head LNG project will use LNG Ltd's patented OSMR® liquefaction technology, and integrate the design and engineering work already completed for the 8Mtpa LNG export terminal being developed in Louisiana by Magnolia LNG into existing feed for the project.

Magnolia LNG is wholly owned by LNG Ltd.

In November, Bear Head LNG filed an application with Canada's National Energy Board (NEB) with an export licence for up to 12 million tonnes per annum of LNG as well as a licence to import up to 503Bscf of gas annually from the U.S.

Analysis

The application to the U.S. DOE to export up to 503Bscf of gas per year will ensure supply to LNG Ltd's Bear Head LNG project.

This corresponds with an earlier application to Canada's NEB to import the same amount of gas and aligns with the projected ramp-up of natural gas production from U.S. supply basins.

Gas may also be sourced from Eastern Canada.

The company has already demonstrated its confidence in the project by filing with Canadian regulators for approval to export up an initial 8Mtpa of LNG beginning in 2019 before increasing to 12Mtpa in 2024 depending on market and supply conditions.

It follows on the progress made on the Magnolia LNG project, which earlier this month agreed on an Engineering, Procurement and Construction contract with SK Engineering and Construction Group.

Capital costs for the initial contracted work for two of the four planned 2Mtpa liquefaction trains is estimated at US$1.986 billion.

Total capital cost for the 8Mtpa Magnolia LNG project remains at US$3.5 billion, or US$440 per tonne, which places it on the low end of capital costs for other U.S. LNG projects.

MLNG also remains on schedule for financial close in mid-2015.

The company remains well funded with a cash balance of $60.4 million and no debt as at 31 October 2014.

LNG Ltd has been a standout performer on the ASX this year with shares rising to its current price of $2.47 since its close of $0.295 on 10 February 2014 prior to the release of a research report by Proactive Investors the next day.

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.