PERTH-based Liquefied Natural Gas Limited (LNGL) has made a significant stride in the development of its Magnolia LNG project in the United States following the signing of an engineering, procurement and construction (EPC) contract term sheet.

The EPC contract was signed between the company’s subsidiary Magnolia LNG (MLNG) and SK Engineering and Construction (SK E&C) and covers the first phase of the Magnolia LNG project.

The project comprises the development of an 8 million tonne per annum export project on the Calcasieu River in Louisiana.

The project will be developed in two phases, with the initial phase comprising two LNG trains, each with an LNG design capacity of 2Mtpa. It will encompass two 160,000m3 storage tanks, jetty and ship loading facility and related infrastructure.

Early estimates by SK E & C put the capital cost for an initial two train project at a project US$1.57 billion.

The EPC term sheet details the generally agreed position of SK E&C and MLNG in relation to more than 45 key commercial provisions to be further developed and included in a lump sum turn key (LSTK) EPC Contract.

BNP Paribas, MLNG’s project finance adviser and Merlin Advisors LLC, the lenders’ technical consultant, contributed to the establishment of the EPC term sheet to assist in ensuring bankability of the provisions.

“The EPC term sheet will materially assist in the early drafting of the LSTK EPC contract and pave the way for a much shorter negotiation and completion period,” MLNG chief operating officer John Baguley said.

LNGL is targeting a final investment decision for Magnolia in late 2014, with financial close forecast for mid-2015.