Primeline Energy Holdings Inc. announced that the overall development programme for its LS36-1 gas field development has received final approval from the Chinese Government.
China National Offshore Oil Corporation (CNOOC) notified Primeline that the National Development and Reform Commission (NDRC) has approved the Development. This approval allows the project Operator, CNOOC, which holds a 51% interest in the Development, to finalise plans for the commencement of gas production. During the last 3 years CNOOC has completed the majority of the development work, including the production platform, development wells, subsea pipeline, gas processing terminal and the offshore section of the gas sales pipeline. The remaining development work includes the laying of the last 3 km of the gas sales pipeline, connection to the provincial gas grid and final commissioning. Construction of the final 3 km of gas sales pipeline commenced in April 2014 and is expected to be completed in June. CNOOC currently envisages that the gas production will commence in Q3 2014, subject to final coordination with the downstream buyer, Zhejiang Provincial Gas Development Co. A separate announcement will be made when the first gas date is fixed and gas production commences.
This approval also allows Primeline and Primeline Petroleum Corporation (PPC), who hold 36.75% and 12.25% interests respectively in the Development, to finalise the financing arrangements for their share of the costs of the Development. Under agreements entered into with CNOOC in relation to the Development, Primeline and PPC would have no obligation to fund cash calls in relation to their share of the costs of the Development until 3 months from the date of the government approval. Primeline and PPC have previously entered into a non-binding Loan Memorandum with China Development Bank (“CDB”) relating to funding for their share of the cost of the Development, which received an in principle approval from CDB’s Credit Committee in January 2013, subject to final approval of the NDRC and finalisation of the loan documentation and security arrangements. Primeline and PPC are negotiating and finalising the formal loan agreement and security arrangements with CDB. A separate announcement will be made when the finance arrangements have been finalised.
Press Release, May 19, 2014