Sydney (Platts)--6Feb2013/555 am EST/1055 GMT

MEO Australia has signed non-binding letters of intent with three shortlisted buyers for up to 8.3 million mt/year of methanol from its proposed Tassie Shoal project, the company said Wednesday.

The maximum total shortlisted demand exceeds the capacity of the proposed Tassie Shoal plant off northwestern Australia, but final quantities to be supplied under long-term contract would be aligned with the project's methanol production, MEO said. The first phase of the project is expected to cost $1.488 billion and would produce 1.75 million mt/year of methanol.

MEO received expressions of interest in April 2012 from potential buyers of the methanol. Since then indicative commercial terms, including methanol pricing, were provided by the major industry participants, the company said.

The letters of intent that have been executed with three "major participants in the methanol market with a strong focus on expanding their Asian businesses," MEO added. The LOIs would provide the basis for the parties to further develop commercial terms for the sales and purchase of methanol from Tassie Shoal, with a view to maturing them toward binding sale and purchase agreements.

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MEO said it was also in discussions with interested parties on broader strategic partnerships, including the acquisition of equity in the Tassie Shoal project.

"In this regard, MEO is developing a commercial relationship with an Asian industry participant on a non-exclusive basis for the purpose of developing [the project]," the company said. "The Asian industry participant is a multinational corporation with broad business interests including in upstream E&P, downstream chemicals and international trading businesses and is considering taking a majority interest in, and assuming operatorship of, the [Tassie Shoal] midstream development."

The proposed Tassie Shoal project would produce methanol from high CO2 feedstock gas at a plant located on a concrete gravity structure resting on the shoal. By designing for high CO2 in the feedstock gas stream, the project would avoid the need for expensive separation, transportation and geo-sequestration required for alternative LNG or domestic gas developments, according to MEO.

For each phase of the project, between 180,000 and 220,000 Mcf/d of gas would be required, depending on CO2 content, to enable the production of 5,000 mt/d or 1.75 million mt/year of methanol.

MEO has secured Australian federal government environmental approvals for two methanol plants to be located at Tassie Shoal.

--Christine Forster, christine_forster@platts.com
--Edited by Wendy Wells, wendy_wells@platts.com

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