LNG Limited: Placement and Strategic Partner Term Sheet Signed with HQCEC (Australia)

The Directors of Liquefied Natural Gas Limited are pleased to announce that a Share Placement Term Sheet was executed on 27 January 2011, in Beijing, China, with China Huanqiu Contracting & Engineering Corporation (HQCEC). HQCEC is a wholly owned subsidiary of China National Petroleum Corporation (CNPC), which is China’s largest producer and supplier of crude oil and natural gas.

The legally binding Term Sheet includes, amongst other things, the following key terms between HQCEC and LNG LTD:

• HQCEC to subscribe for 53,250,000 shares in LNG LTD, equivalent to approximately 19.9% of the total issued shares in LNG LTD after the placement (Placement), at a price per share which is the lesser of:

– A$0.48 cents (~A$25.6 million), or

– 80% of the volume weighted average market price (as such term is defined in the ASX Listing Rules) of ordinary shares in LNG LTD on the ASX, calculated over the last five days in which sales of ordinary shares in LNG LTD are recorded on the ASX prior to the issuance date of the Placement shares.

The A$0.48 cents is a 10.6% discount to the volume weighted average market price of LNG LTD’s shares (A$0.537) for the 180 days to 27 January 2011 and a 19.3% discount to the volume weighted average market price (A$0.595) for the 5 days prior to the date of signing the Term Sheet.

• Application of the Placement proceeds to the development of LNG LTD’s wholly owned 3 million tonne per annum Gladstone LNG project at Fisherman’s Landing, Port of Gladstone, Queensland, Australia (Gladstone LNG).

• Appointment of a HQCEC nominee as a Non Executive Director to the Board of LNG LTD.

• Appointment of a HQCEC nominee as an Executive Director to the Board of LNG LTD and Co Chief Executive Officer of LNG LTD, to work with the existing Managing Director/Chief Executive Officer, Maurice Brand.

• Appointment of HQCEC, or an affiliate of HQCEC or CNPC, as the sole Engineering, Procurement, Construction and Commissioning (EPC) contractor for Gladstone LNG, conditional on HQCEC providing a competitive EPC proposal based on LNG LTD’s wholly owned OSMR® process technology.

• Agreement to negotiate preferential terms for HQCEC, CNPC and their affiliates to use LNG LTD’s OSMR® process technology.

• Consideration by HQCEC and CNPC, or an affiliate of CNPC, as to their involvement in Gladstone LNG, including direct investment in Gladstone LNG, purchase of the proposed initial 3 million tonne per annum LNG production capacity from Gladstone LNG’s first two LNG trains and financing of Gladstone LNG to promote the development of Gladstone LNG.

• LNG LTD’s ongoing pursuit of gas supply for Gladstone LNG’s first two 1.5 million tonnes per annum LNG trains.

The Term Sheet is, amongst other things, conditional on:

• HQCEC obtaining relevant approvals (on terms satisfactory to HQCEC) from the Australia Government’s Foreign Investment Review Board, China’s Ministry of Commerce and National Economic Reform Commission and CNPC; and

• LNG LTD obtaining shareholders’ approval, if required.

HQCEC and LNG LTD are now advancing various definitive agreements, including a Share Subscription Agreement, based on the agreed Term Sheet. The parties are targeting completion of the Placement in the second quarter of 2011.

LNG LTD’s Chairman, Richard Beresford, said that “the proposed investment by HQCEC in LNG LTD will be a significant milestone and major step in LNG LTD’s future direction and a vote of confidence in the Company’s OSMR® process technology, including its low capital and operating costs, faster construction schedule, improved efficiency and lower carbon footprint than other mainstream LNG processes. In addition to Gladstone LNG, HQCEC and LNG LTD will immediately work on new project opportunities based on LNG LTD’s business model and the OSMR® process technology. I welcome HQCEC as the largest shareholder in LNG LTD and look forward to working with the HQCEC nominated Directors so that LNG LTD can fully realize its potential”.

LNG LTD’s Managing Director and CEO, Maurice Brand said “the appointment of a HQCEC nominated Executive Director and Co CEO will allow the Company to liaise with and access the significant global resources of HQCEC and the CNPC group which will materially assist LNG LTD to progress its current project portfolio and target a number of new LNG project opportunities.”

“Importantly, HQCEC and LNG LTD will now work together to deliver Gladstone LNG”, said Mr Brand.

Source: Liquefied Natural Gas Limited, January 27, 2011;

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