magellan may be about to sign up meo hub, page-3

It appears Magellan is cutting it fine regarding the Evans Shoal transaction.

This is from today's 3Q SEC filing released today:

* Magellan Operations Update *

'Evans Shoal Transaction

Due to field partner activity, the terms of our entry into the Evans Shoal license remain under discussion as we continue to work in earnest. Meetings over the next two weeks will add clarity toward final solutions. Magellan, YEP, and Santos remain committed to closing the transaction. We intend to provide updates as material milestones have been achieved.

The original agreement was 25 March 2010 at the same time as the acquiring NT09-1 (S of Evans Shoal and SE NTP68). They received FIRB approval 7 June 2010 but couldn't meet the 24 Dec deadline. An extension to was given up to 31 Jan 2011 but this was also not met so, at a default cost (A$15.6m) guaranteed by YEP, an extension to the deadline was given until 31 May.

Mention was given in MGN's short statement about 3rd party activity. As needle says, the other participants in Evans Shoal are Petronas (25%), Shell (25%) and Osaka Gas (10%).

Whether any of these are in negotiations with MEO is unclear, because of the confidentiality clause, but MEO's farmout of Heron may well be linked to the complexities of MGN's purchase of Santos' 40% share of ES.

MGN may also be having problems with Methanex who have been down the track of a Methanol plant based in Darwin before:

* See the report here *

From that report:

'The cost associated with the development of the project including the gas supply, syngas facility and downstream plants was put at $5 billion'

The project was cancelled:

'In September 2003, Methanex announced that it would not proceed with the construction of its proposed Australian methanol production plant. The company said that capital costs had escalated to an unacceptable level. It added that it could not proceed with large capital projects that would only deliver marginal returns.'

So this is another hurdle. Not only is a supply of gas needed and the JV has to be assured of a return for upstream costs but the downstream costs of the pipeline to, and plant in, Darwin also need to be verified to a point further than 2003. MEO have a 50/50 agreement with Air Products for the Tassie Shoal project but could they also be in talks with Methanex too? Air Products TSLNG - Methanex TSMP? Or Methanex to take over the whole project?

MEO's TS gives a far cheaper solution for developing gas in the area. It reduces the need for lengthy pipelines to Darwin and modules can be produced at reduced cost in Asia and floated to TS.

The ES PPs may not be convinced MGN will be able to get the Darwin solution off the ground. To save the project MGN may well be looking at the far cheaper TS solution. The longer this stalemate goes on the better it is looking for MEO IMO.

I am not sure whether another extension is on the cards for MGN or whether MGN will have the fortutude to go on post 31 May.

It looks as though it will be a very busy two weeks for all the parties involved.

Whilst us MEOmites sit and twiddle our thumbs. One thing though, JH won't be sitting on his hands!

But this is only my opinion.

#:>))