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Hogan Lovells Advises Medco Energi On Landmark Donggi-Senoro LNG Project In Indonesia and Recent Upstream Sale

10 February 2011

SINGAPORE, 10 February 2011 - Hogan Lovells is advising PT Medco Energi Internasional Tbk. and its related entities (“Medco Energi”) on all aspects of the landmark US$2.8 billion Donggi-Senoro LNG project in Central Sulawesi, Indonesia (the “Donggi-Senoro LNG Project”), which has now been sanctioned by the sponsors. The Donggi-Senoro LNG Project is:

  • the first LNG project in Indonesia to be structured as a downstream project under Law No. 22 of 2001; and
  • the first joint LNG project between Japan, Korea and Indonesia, which involves the world’s largest LNG buyer, Korea Gas Corporation (“KOGAS”), Mitsubishi Corporation (“Mitsubishi”), Japan’s largest trading house, Medco Energi and PT PERTAMINA (PERSERO), Indonesia’s State Owned oil and gas company.

PT Donggi-Senoro LNG (“DSLNG”) will own and operate the LNG plant, and is owned by Mitsubishi (45%), Pertamina (29%), Medco Energi (11%) and KOGAS (15%). The LNG plant will have a production capacity of approximately two million tonnes of LNG per annum.

DSLNG plans to start production of LNG and condensate in the second half of 2014 and exports of LNG will be delivered to Chubu Electric Power Co., Inc., Kyushu Electric Power Co., Inc. and KOGAS. The natural gas for the LNG Plant will be supplied from the Senoro Gas Field (located in the contract area of the Senoro-Toili Block Production Sharing Contract) and other fields operated by Pertamina. The expected cost for the construction of the upstream facilities is US$600 million and will include gas processing facilities, pipelines, condensate handling facilities and harbour works.

Hogan Lovells also advised Medco Energi on the sale of a 20% participating interest in the Senoro-Toili Block Production Sharing Contract to Mitsubishi for US$260 million. The transaction completed on 31 January 2011. Medco Energi retains a 30% working interest and Pertamina holds a 50% working interest in the Senoro-Toili Block Production Sharing Contract.

Hogan Lovells’ team was led by Brad Roach, an energy partner in our Singapore office who has advised Medco Energi in relation to the Donggi-Senoro Project since its inception in 2006. He also represented Medco Energi and Pertamina in negotiating the gas sales agreement for the sale of 250 million standard cubic feet per day from the Senoro Gas Field to DSLNG. He was primarily assisted by corporate associates, Brigg Baxter and Justin Tong in our Singapore office in connection with the divestment of Medco Energi’s 20% participating interest in the Senoro-Toili Block Production Sharing Contract.

Brad Roach commented as follows:

“I first began advising Medco Energi and Pertamina in relation to the project in 2006 when many doubted that the reserves could be developed. Thanks to the persistence and energy of the sponsors, and the impetus created by Mitsubishi Corporation joining the downstream company, the project was realised. The project is the first downstream LNG project in Indonesia and the different ownership interests in the value chain required careful management. We were very pleased to also advise Medco Energi in relation to the sale of part of its upstream interest to Mitsubishi, which will strengthen partner alignment in the project.”

Lukman Mahfoedz, the Corporate Project Director of Medco Energi commented upon the role of Hogan Lovells on the transaction:

“We were extremely happy with the assistance of Hogan Lovells throughout the implementation of this complex project. Under Brad Roach’s leadership, the team from Hogan Lovells worked very closely with our internal legal and commercial team to overcome many challenges and provided commercial and solution oriented advice every step of the way.”

 
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