World's first FLNG unit in sight

FLEX LNG has secured agreements with InterOil, Pacific LNG, LNGL and Samsung Heavy for a floating liquefied natural gas project which would liquefy natural gas from onshore Papua New Guinea.

Targeting a 2014 start of operations date, Flex said the agreements are a result of a strong collaboration over the past 12 months between all parties to work together to develop what is likely to become the first ever floating facility to produce LNG.

The FLNG vessel is expected to be moored alongside a jetty, which will be shared with LNGL's land-based LNG facilities and have a nominal production capacity of close to 2 million tons of LNG per annum and to process an estimated 2.25 trillion cubic feet of gas over a 25-year period.

Flex and Samsung Heavy Industries will be responsible for the design, engineering, construction and commissioning of the FLNG vessel.

Flex will receive 14.5% of the revenue from the sale of LNG from the FLNG vessel for an initial 15-year period.

For the next five years it will receive 12.5% of the revenue and 10% of the revenue for the last five-year period.

During the life of the contract, LNGL will become a part owner of the FLNG vessel.

As a part of the arrangements, InterOil and Pacific LNG will receive options, exercisable no later than 15 days after Flex shareholder approval of this equity transaction, to acquire 11,315,080 common shares in Flex at an average strike price of 4.5909 NOK (A80c).

This is about a 12% premium to the average share price during October 2010 when an initial non-binding agreement was executed between Flex, InterOil and Pacific LNG.

The agreements signed with InterOil, Pacific LNG, LNGL and Samsung Heavy Industries are all conditional upon Flex's shareholders approving the proposed equity transaction with InterOil and Pacific LNG.

Such approval is targeted no later than the end of April 2011.

Flex chief executive Phillip Fjeld said he was proud of the deal, which would allow the world's first FLNG unit to come into operation.

"Flex LNG has today on the backbone of extensive work with Samsung Heavy Industries, InterOil and Pacific LNG, taken a momentous step towards successfully materialising the vision of the company and to establishing a strong foundation for the world's first FLNG unit to commence operations in 2014," he said.

"Through this project FLNG will move from concept to reality, which is a major step forward for Flex LNG and the FLNG industry as a whole.

"The LNG landscape is rapidly changing and the agreements signed for the FLNG project in PNG are a prime example of Flex LNG's capability to structure innovative, value-added customer solutions in close partnership with Samsung Heavy Industries."

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