Venice Energy inks FSRU deal with AG&P LNG

Venice Energy, the developer of the Outer Harbor LNG import project in the Port of Adelaide, has signed a deal with AG&P LNG to secure a converted FSRU for its planned project in South Australia.

The company signed a heads of agreement with Greece’s GasLog in July 2021, under which the latter agreed to supply an FSRU for the project.

In January 2023 Paolo Enoizi, CEO of GasLog said that company agreed in principle to convert one of its 145,000-cbm steam LNG carriers to an FSRU and charter it to Venice Energy.

He said such conversion was expected to cost in excess of $100 million.

According to GasLog’s data, the company’s steam LNG carriers as of November 16, 2023, included the 2006-built Methane Jane Elizabeth, the 2006-built Methane Rita Andrea, the 2007-built Methane Alison Victoria, and the 2007-built Methane Heather Sally.

AG&P LNG purchased GasLog’s carrier

Venice Energy’s managing director, Kym Winter-Dewhirst, said in a project update on Thursday that last year GasLog “underwent a major restructure and in doing so made the decision to sell-off a number of vessels to others.”

“AG&P emerged as the purchaser of the vessel assigned to our project. Following meetings with them in Singapore late last year and this month in the UAE, we have secured a new commercial agreement that guarantees the project will receive the converted FSRU at an improved cost and in a timely manner,” he said.

Winter-Dewhirst did not provide any details regarding the vessel. He noted that AG&P LNG owns and operates the Philippines LNG (PHLNG) import terminal and is developing the Karaikal LNG terminal in India.

“AG&P LNG have completed three FSRU conversions and have the advantage of access to their own shipyards via their parent company in South Korea,” he said.

US investment and asset management firm, Nebula Energy, recently purchased a majority stake in AG&P LNG, a unit of Singapore-based AG&P.

Project divestment

“Whilst in Dubai and Abu Dhabi, we met with several others to discuss investment in Venice Energy and divestment of the Outer Harbor LNG project,” Winter-Dewhirst said.

He said that the “strength of their interest and the breadth of some of the proposals put to me was something of a surprise but at the same time very encouraging.”

In recent months, Venice has been approached by a “number of companies” to discuss the purchase of the project.

Venice has appointed international M&A specialists CLSA to run a process for interested companies.

“To date, 15 companies have expressed their interest in the project and eight have so far registered as part of the due diligence process following the opening of a data room,” Winter-Dewhirst said.

“Although the requirements of non-disclosure agreements (NDAs) prevent us from naming these companies, I can say they come from a number of different sectors, including existing energy operators, industrial gas consumers, international LNG-specific companies and some private equity players,” he said.

Origin deal

In October last year, Venice Energy signed an exclusivity agreement with Australia’s Origin Energy to enable negotiations on Origin becoming the single user of the LNG import terminal.

That agreement concludes at the end of this month.

In the meantime, Origin’s shareholders rejected a takeover bid by a consortium consisting of Canada’s Brookfield Asset Management and a unit of US-based energy investor EIG

Winter-Dewhirst said there was an expectation that a final 10-year terminal user agreement (TUA) would be settled sometime in December 2023 or January 2024.

“Venice Energy believes that elements of our negotiations with Origin have been impacted following the announcement by the federal government on proposed changes to domestic gas supply, which has introduced additional uncertainty into the gas market,” he said.

“We are continuing to negotiate in good faith with Origin on potential solutions to ensure that that enough new gas is delivered to avoid critical shortfalls as a result of rapidly declining domestic production,” Winter-Dewhirst said.

Project is “shovel-ready”

Venice Energy also said that stage 1 enabling works at Outer Harbor are complete and the project is now “shovel-ready”.

“This includes a significant dewatering of large-scale dredge ponds, which was a particular challenge during December following record rainfall in excess of 100mm for that month,” Venice Regas CEO John Nicholson said in the update.

He said the team has completed the earthworks for the construction access roads and the lay-down area to bring bulk materials to site.

“A major program of geotechnical drilling was also undertaken, to a depth of more than 40 meters. Drilling was undertaken adjacent to the proposed wharf construction area and will allow finalisation of the wharf design,” he said.

Nicholson said this work has produced “very positive results that will significantly reduce the project’s capital costs as we work to fully optimize both the delivery schedule and budget.”

“Venice’s project team has done a remarkable job so far to gain a full suite of project approvals; lock in a range of key permits and plans; and to recently complete stage 1 enabling works on site,” he said.

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