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  arathon
is successfully implementing its integrated gas strategy, which
is designed to complement the Company’s exploration and
production operations by accessing low-cost stranded natural
gas resources and creating value by applying technology and
commercial skills to connect those resources to markets.
Major milestones included reaching the final investment decision
and a groundbreaking ceremony for the Equatorial Guinea LNG
facility and the signing of a North American LNG supply agreement
associated with delivery rights at Elba Island, Georgia.
Equatorial Guinea LNG
In June 2004, Marathon, the Government of Equatorial Guinea and Compania
Nacional de Petroleos de Guinea Ecuatorial (GEPetrol), the National Oil Company
of Equatorial Guinea, announced the final investment decision for the Equatorial
Guinea LNG project. Construction of this plant and related facilities is
on schedule for shipment of first LNG cargoes in late 2007.
Natural gas will be purchased from the Alba field participants under a long-term
gas supply agreement, and 3.4 million metric tonnes per year of LNG will be sold to BG Gas Marketing Ltd (BGML), under a 17-year purchase
and sale agreement beginning in late 2007. BGML will purchase the LNG on a free-on-board basis at Bioko Island, Equatorial Guinea, with pricing linked principally to the Henry Hub index.
This project is expected to be one of the lowest-cost LNG operations in the
Atlantic Basin with an all-in operating, capital and feedstock cost of approximately
$1 per MMBtu at the loading flange of the LNG plant.
Efforts are under way to acquire additional gas supply and expand the utilization
of this LNG facility above and beyond the agreement with BGML. Marathon also
is seeking additional natural gas supplies in the area that could serve as
the basis for the development of a second LNG train.
Elba Island
During the fourth quarter, Marathon signed an agreement with BP Energy Company under which BP will supply Marathon with 58 bcf of natural gas per year, as LNG, for a minimum period of five years beginning in the second half of 2005. Marathon will take delivery at the Elba Island, Georgia, LNG regasification terminal where in 2002 Marathon acquired the right to deliver and sell up to
58 bcf of natural gas per year for 22 years. Pricing
of the LNG will be linked to the Henry Hub index.
The agreement with BP strengthens Marathon's integrated gas business, helping supply the U.S.
market as domestic supplies continue to tighten. During 2004, Marathon secured six cargoes of LNG, utilizing its Elba Island delivery rights. The Company is continuing to actively seek additional cargoes prior to the start of deliveries under the
BP supply agreement.
The agreement with BP strengthens Marathon’s integrated gas business, helping supply the U.S. market as domestic supplies continue to tighten. During 2004, Marathon secured six cargoes of LNG, utilizing its Elba Island delivery rights. The Company is continuing to actively seek additional cargoes prior to the start of deliveries under the BP supply agreement.
Methanol Operations
In 2004, Marathon's interest in the AMPCO methanol plant in Equatorial Guinea delivered record volumes during a period of strong prices. Marathon owns
a 45 percent interest in the methanol plant, which
supplies customers in Europe and the United States.
Gas Utilization Technology
Marathon continues to research gas utilization technologies to realize the full potential of its integrated gas business. A major focus is on GTL technology, which offers the ability to turn natural gas reserves, currently stranded from the marketplace, into high-quality premium fuels. GTL technology could
provide Marathon with a competitive advantage
to access global resources in the future.
Marathon and Syntroleum Corporation successfully completed the construction and operation of
a GTL demonstration plant at the Port of Catoosa, Oklahoma. This GTL project was part of an ultraclean fuels production and demonstration project sponsored by the U.S. Department of Energy's National Energy Technology Laboratory. The demonstration plant, which mirrored a commercial-scale plant, successfully demonstrated a fully integrated GTL technology that converted natural gas into a finished fuel, producing more than 5,500 barrels of synthetic products, including ultra-clean diesel fuel, which was used for fleet vehicle testing in Washington, D.C., and Denali National Park, Alaska. The successful Port of Catoosa GTL plant supports Marathon's ongoing efforts to explore the potential of GTL technology, and demonstrated how such technology could be incorporated into the design of a commercial GTL facility, such as Marathon's proposed gas processing project in Qatar. |
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