|
Jordan Cove LNG battles on
A Michigan-based company has won the first round of a court fight to acquire up to 20 percent of the Jordan Cove LNG project in Oregon, even though the scheme has been switched to an “export” from an “import” proposal.
The Ontario Superior Court of Justice ruled Feb. 26 that Energy Fundamentals Group is entitled to exercise an equity option that was laid out in an agreement dated July 2005 with Fort Chicago Energy Partners, a predecessor of the current operator, Calgary-based Veresen.
But a spokeswoman for Veresen said her company is considering an appeal, arguing EFG has had “no involvement in Jordan Cove as an export” facility.
She said the purchase option was issued in return for financial advice when Jordan Cove announced it was planning to import and regasify foreign-sourced LNG.
The official said Veresen would not consider EFG a suitable candidate to join those who are in the running to become equity partners capable of helping finance the US$5.3 billion project.
Option on 20 percent Although EFG was not available for comment, it describes itself on the company website as a “project sponsor and participant” in Jordan Cove, with “an option on 20 percent ownership equity in the terminal project which it may exercise at any time prior to the commercial operating date.”
Robert Kwan, an analyst with RBC Dominion Securities, said last summer that EFG’s cost to join the project would be about US$100 million - a number he now says is likely to rise as the project advances.
He said the option agreement requires EFG to pay Veresen an amount equal to 20 percent of all development equity contributed prior to that time plus a premium after-tax return of 30 percent (compounded annually) on development equity from the time those costs were incurred.
Kwan said that if EFG exercises the option that would not have a material financial impact on Veresen, but it could be seen as complicating the process of finding buyers or marketers.
Customer contracts needed Jordan Cove has export permits from regulators in Canada and the United States to export LNG, but it is still faced with securing customer contracts for 100 percent of capacity before it can make a final investment decision.
It also needs U.S. federal environmental approval by mid-2015, if it hopes to achieve an optional startup in 2019.
Initial capacity is set at 6 million metric tons per year of LNG, liquefying 1 billion cubic feet per day of natural gas, with plans to expand by 50 percent.
Veresen decided last September to invest US$1.5 billion on a 50 percent non-operated stake in the Ruby pipeline system from gas fields in the U.S. Rockies to the LNG terminal at Coos Bay on the Oregon coast.
- Gary Park
| 