Hong Kong, 31 August, 2004 LAWFUEL – Best for law, law news, legal news, legal research – Baker & McKenzie’s Major Projects Group in Hong Kong advised K-Power, a joint venture company between SK Corporation of Korea and BP Plc, on its US$2 billion 20-year LNG Sale and Purchase Agreement from the Tangguh LNG Project in Indonesia, being developed by BP and its partners.
K-Power will buy 600,000 tons a year of the fuel starting from 2006, with an option to buy an additional 200,000 tons a year of LNG from Indonesia until 2010. The LNG from BP’s Tangguh Project will be used to fire K-Power’s 1,074MW power plant in Kwangyang, south of Seoul, Korea. The power plant will start operations in 2006.
Won Lee and David Smith, partners, and Damien Criddle, senior associate, in the Major Projects Group in the Hong Kong office of Baker & McKenzie advised and negotiated the LNG SPA on behalf of K-Power. They also continue to advise K-Power on the terminal regasification arrangement with POSCO, the operator of the Kwangyang LNG Terminal.
Commenting on the deal, David Smith said, “The transaction is particularly significant, since it will be the first supply of LNG to a private buyer in Korea, utilising opportunities created by deregulation of the Korean LNG market. The Kwangyang LNG terminal is also a major construction undertaking and will supply regasified LNG to the Kwangyang IPP and industrial users. There are very significant structuring complexities arising from the fact that the Tangguh project, the LNG Terminal, and the Kwangyang IPP are greenfield projects and all must fit together seamlessly in the ‘gas chain'”.
Damien Criddle added, “This is a major milestone for Korea in breaking the traditional monopoly enjoyed by KOGAS in the Korean market and introducing independent LNG buyers. At the same time, this agreement is a vital constituent to getting the Tangguh LNG project off the ground”.