October 29, 2018 / 4:27 AM / 17 days ago

LNG Ltd delays Magnolia project go-ahead amid U.S.-China spat; shares dive

MELBOURNE, Oct 29 (Reuters) - Australian-listed LNG Ltd said on Monday it is delaying a final decision on whether to build its Magnolia LNG plant to next year as it has run into problems lining up customers in China, knocking its shares down 28 percent.

LNG Ltd had planned to make a final investment decision by the end of 2018 on Magnolia, which would be designed to produce 8 million tonnes of year liquefied natural gas (LNG).

“We made that statement prior to the trade tensions that have manifested over the past months, which have caused headwinds for LNG transactions,” LNG CEO Greg Vesey said in a quarterly report.

The company is now targeting final approval for the Magnolia LNG project in Louisiana in “the first part of 2019”, depending on how talks to line up contracts go, he said.

“While trade issues with the Chinese market impact our discussions, our negotiations with customers in other parts of the world remain strong.”

The company is developing two plants — Magnolia, from where it hoped to begin exports in 2022, and another in Nova Scotia in Canada.

Vesey told Reuters in May: “For us, it’s strictly been about marketing to China.”

That was before Beijing imposed a 10 percent tariff on U.S. LNG in an escalating trade dispute with Washington.

There are varying views on how and when the trade issues with China will be resolved, Vesey said on Monday.

“Considering that, our communications with potential Chinese offtakers remain robust with the intent to complete agreements if trade tensions abate before Magnolia is fully sold out,” he said.

The United States is on track to export over 1,000 billion cubic feet (bcf) of gas as LNG in 2018. One billion cubic feet is enough to fuel about 5 million U.S. homes for a day.

But China, which purchased about 15 percent of all U.S. LNG shipped in 2017, is now on track to buy less than 100 bcf of U.S. LNG in 2018, less than last year, according to Thomson Reuters vessel tracking and U.S. Department of Energy data.

Shares in LNG Ltd fell as much as 28 percent to a one-year low of A$0.39.

Reporting by Sonali Paul; editing by Richard Pullin

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