Marathon and GEPetrol Announce Final Investment Decision on Equatorial Guinea LNG Project

Source: 6/22/2004, Location: Africa

Marathon Oil Corporation, the Government of Equatorial Guinea and Compania Nacional de Petroleos de Guinea Ecuatorial (GEPetrol), the National Oil Company of Equatorial Guinea, through subsidiary companies, announced that they have finalized all of the necessary agreements, including formation of Equatorial Guinea LNG Holdings Limited and GEPetrol's funding arrangements, for the companies' Equatorial Guinea liquefied natural gas (LNG) project. This marks the final investment decision for this LNG project, which is expected to be completed and begin shipping first cargoes of LNG in late 2007 -- a record setting pace from project inception to first delivery of LNG. This major investment is an endorsement of the Government of Equatorial Guinea's progressive policy to encourage private foreign investment and stimulate economic development.

"Today's announcement marks a significant achievement for the Government of Equatorial Guinea, GEPetrol and Marathon that will fulfill our shared ambition to further commercialize the substantial gas resources of Equatorial Guinea. The Equatorial Guinea LNG project also is an important milestone in our ongoing implementation of Marathon's integrated gas strategy," said Clarence P. Cazalot, Jr., President and CEO of Marathon. "This LNG project is an excellent investment opportunity that will yield attractive rates of return enabling both Marathon and Equatorial Guinea to create sustainable value growth. We also are pleased to be working with GEPetrol and the Government of Equatorial Guinea to develop a project that will provide economic, social and environmental benefits for the citizens of Equatorial Guinea."

This project will be one of the lowest cost LNG operations in the Atlantic basin with an all-in LNG operating, capital and feedstock cost of approximately $1/mmbtu at the loading flange of the LNG plant.

Currently Marathon, through a wholly owned subsidiary, is funding a 75 percent interest in the LNG project, with GEPetrol funding the remaining 25 percent. Marathon and GEPetrol have received expressions of interest from a number of companies about acquiring an equity interest in the LNG project.

Natural gas for the project will be purchased from the Alba field participants, Marathon, Noble Energy, Inc. (NYSE: NBL) and GEPetrol, under a long term gas supply agreement, and 3.4 million metric tons per year of LNG will be sold to BG Gas Marketing Ltd (BGML), a subsidiary of BG Group plc, under a 17 year purchase and sale agreement beginning in late 2007. BGML will purchase the LNG on a free on board (F.O.B.) basis at Bioko Island, Equatorial Guinea, with pricing linked principally to the Henry Hub index. BGML intends to target the Lake Charles (Louisiana) import terminal as the primary destination for the LNG; however, the agreement provides destination flexibility for the LNG, enabling BGML to take advantage of prevailing market conditions at other import destinations around the world.

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