Tidelands Oil & Gas Corporation today announced that it has entered into an agreement with Cheniere Energy, Inc. to fund the development of Tidelands' Burgos Hub Export/Import Project, which potentially will connect the North American pipeline grid to natural gas supplies and markets in northern Mexico. Cheniere has purchased an 80% equity interest in the project in exchange for up to $9 million in current and future payments plus royalties to be paid to Tidelands.
James B. Smith, Tidelands' President and Chief Executive Officer said, "We are pleased to have Cheniere as a partner in this venture. Their demonstrated vision in other energy infrastructure projects and their potential ability to secure competitive gas supply for our target markets represents real value added to the Burgos Hub Export/Import Project. With Cheniere as a partner, we will be able to accelerate development of the project to streamline the North American natural gas market."
Tidelands received an initial $1 million payment when the agreement with Cheniere was signed on September 28, 2007. Additional payments will be made as construction begins on each phase of the project. In addition, Cheniere will pay Tidelands $25,000 per month for 24 months, for management consulting related to the project. Upon completion of each phase, Tidelands will receive a $0.01 per MMBtu royalty on Phase I and Phase II subscribed volumes and a $0.02 per MMBtu royalty on Phase III subscribed storage. Cheniere will fund, at its discretion, all project development expenses up and until construction of each Phase begins. At that time each party will fund their respective share.
The Burgos Hub Export/Import Project will be constructed in three phases. Phase I will consist of a pipeline extending from the Valero Gilmore Plant, located at Hidalgo County, Texas to Estacion Arguelles, located in Tamaulipas, Mexico, to Station 19 of Pemex Gas y Petroquimica Basica to Monterrey, Mexico; Phase II will be the construction of a pipeline extending from the Donna Station to the Brazil Storage facility to Station 19 of Pemex Gas y Petroquimica Basica; and Phase III will be the construction of the Brazil Storage Facility, an underground natural gas storage facility to be located in Rio Bravo, Mexico.
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