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Teekay and Merrill Lynch agrees

Teekay and Merrill Lynch agrees
An agreement between Teekay Corporation and Merrill Lynch Commodities (MLC) will see the pair jointly developing a liquid natural gas (LNG) operation in Kitimat.

An agreement between Teekay Corporation and Merrill Lynch Commodities (MLC) will see the pair jointly developing a liquid natural gas (LNG) operation in Kitimat.

An agreement between Teekay Corporation and Merrill Lynch Commodities (MLC) will see the pair jointly developing a liquid natural gas (LNG) operation in Kitimat. But unlike the Kitimat LNG proposal to build a liquefaction plant on shore, their plan calls for moor a floating liquefied plant that would double as the transportation method.

Alana Duffy, communications manager with Teekay, said the terms of the agreement are confidential and could not be discussed.

But she did say a floating LNG plant would be able to get gas to markets more quickly and at a competitive cost.

As for employment opportunities, it"s too early to tell how the community will benefit.

?We anticipate some economic benefit both in Kitimat and surrounding communities,? said Duffy. ?But I think at this point it"s too early to specify what that will actually look like.?

So far the project needs export and environmental approvals and the companies hope to have those in place sometime in 2009 or 2010.

Where the vessel would be moored is also unknown at this time. Duffy said that several tidewater sites are being considered, ?almost all of which are on the west side of the Kitimat Arm, between Emsley Cove and the existing industrial wharves.?

The vessel will have the capacity to liquefy 75-100 million standard cubic feet per day, which works out to approximately half-a-million tonnes a year.

Gas product would likely be supplied by Pacific Northern Gas which has entered into a letter agreement with MLC to grant them an extendable option to contract for 75 million cubic feed (MMcf) a day of firm gas, according to a PNG press release.

The BC Utilities Commission (BCUC) is reviewing the agreement and PNG is waiting for its decision before a $1.5 million non-refundable option fee, paid by MLC, is released to PNG. That money is already sitting in an escrow account.

Terms of PNG"s agreement with MLC will give the commodity trader an exclusive option until December 31 this year for pipeline capacity for a two to five year term. MLC also has the option to renew the contract for an additional two to five year term.

And it can extend the initial option period by up to four six-month periods. Each extension would cost them $1 million.

If MLC takes up the option, it would mean PNG"s surplus capacity in its existing capacity would be fully utilized, generating ?almost $15 million per year of incremental revenue for the benefit of PNG and its customers.?

PNG notes that it can provide no assurances that the letter agreement will be approved by the BCUC or that MLC will exercise their option.

PNG continues to pursue the development of the Kitimat-Summit Lake (KSL) pipeline project through their interest in Pacific Trail Pipelines.

www.TurkishMaritime.com.tr

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