LNG construction projects, plans move ahead, buck cost pressures
Warren True
Colleen Taylor Sen
Colleen Taylor Sen, GTI, Des Plaines, Ill.
Warren R. True, Editor
Despite escalating costs of materials and labor, LNG construction worldwide through mid-2007 has continued, with particular progress being made in Asia and the Americas.
While Australia has decided to move ahead with major project Pluto, China is on track in 2007 to import more than 6 million tonnes as it works to build additional terminals. In North America, the first receiving terminal on the West Coast is advancing towards start-up in the next 6 months.
In Europe, the much-delayed and discussed Barents Sea Schtokman project made a decisive step towards realization earlier this summer when Russia’s Gazprom announced its first partner for the project. And in North Africa, plans to repair the damaged Skikda liquefaction plant in Algeria have finally begun to move ahead.
Australasia
Australia, already the world’s fourth largest LNG exporter, is moving ahead with new projects that could help quadruple its LNG exports by 2010.
In late July, the board of Woodside Petroleum Ltd. approved development of the 4.3-4.8 million tonnes/year (tpy) Pluto LNG project at Karratha on Western Australia’s Burrup Peninsula. It will use feedstock from the offshore Pluto and Xena fields, estimated to hold 5 tcf of reserves. Woodside has additional exploration acreage in the area. Start-up is set for 2010, pending receipt of still-needed regulatory and environmental approvals.
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Ground clearing progresses in earnest near Karratha on Western Australia’s Burrup Peninsula for Woodside Petroleum Ltd.’s Pluto LNG project. In mid-2007, the company announced it was moving ahead with the 4.3-4.8 million tpy, $12 billion (Aus.) project. Photograph from Woodside.
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Participants are Woodside (owned 34% by Shell) with a 90% share and Tokyo Gas and Kansai Electric, each with 5%. Woodside also operates the North West Shelf project in which it has a 16.7% interest.
The project will be backed by 15-year contracts (with a 5-year option) for the sale of up to 3.75 million tpy of LNG to Tokyo Gas and Kansai Electric, which will each build and operate an LNG carrier. Woodside will lease another tanker and is evaluating additional shipping requirements.
Project cost will run an estimated $12 billion (Aus.), around 20% more than originally projected. Woodside’s board also approved consideration of a one- and a two-train expansion.
Santos is proposing a 3-4 million tpy liquefaction plant at Gladstone in Queensland on Australia’s East Coast that would be the first in the world to use coalseam methane as feedstock. The plant could cost as much as $7 billion (Aus.), half of it for upstream field development. A final investment decision will come by yearend 2009; deliveries could start in early 2014.
At least eight more LNG Australian projects have been proposed (accompanying table). Government officials say Australian LNG exports could quadruple to more than 50 million tpy within a decade.
In September, in Australia’s Gorgon project, Shell Eastern LNG signed binding heads of agreement with PetroChina International Co. to supply 1 million tpy of LNG for 20 years. The companies expect to conclude the sales and purchase agreement (SPA) by yearend 2008, contingent upon an FID by the Gorgon joint-venture Chevron (50%, ExxonMobil (25%), and Shell (25%). This agreement augments others to sell up to 2.5 million tpy to Mexico and 500,000 tpy to India.
The original $8.6 billion budget for the total Gorgon project-field development and LNG-has been pushed much higher by rising labor and materials costs. Fields holding more then 40 tcf backstop the liquefaction segment.
Also in early September, Gorgon received final approval from the Western Australian government, a major hurdle that had threatened the stop the project.
For approval, WA’s Environment Ministry set “stringent” environmental conditions, among which Gorgon must establish a reservoir for a CO2 reinjection and expert panels to protect the biodiversity of Barrow Island surrounding marine environment. The sequestration plan proposes to reinject about 3 million tonnes of CO2/year under Barrow Island at a cost of about $850 million (Aus.) in the following 10 years.
The plan also includes a $60 million (Aus.) extra commitment by Gorgon to conserve rare flatback turtles and other endangered species.
In Browse LNG, another Australian project, PetroChina signed a preliminary agreement to buy 2-3 million tpy of LNG for 15-20 years from Woodside Petroleum’s proposed project in what could be Australia’s largest-ever export deal. Woodside said deliveries would begin 2013-15. PetroChina is developing three LNG terminals at Dalian on the northeast coast, Tangshan in Hebei Province, and Rudong in Jiangsu.
In Japan, following shutdown of its 8.2-Gw Kashiwazaki-Kariwa nuclear plant in western Japan after an earthquake in July, Tokyo Electric Power Co. Ltd. has projected that it will double its imports of crude oil and buy 18.8 million tpy of LNG (equivalent to 10-15 spot cargoes), up from its earlier projection of 17.5 million tonnes. The plant is expected to be shut through March 2008.
Taikoku Oil, subsidiary of Inpex Holdings Inc., announced plans to build a small LNG terminal at Joetsu, Niigata prefecture, in northwest Japan. Construction would start in 2009 and operations begin in late 2013 with an initial capacity of 600,000 tpy. The terminal would be the 28th in Japan.
Supplies could come from Indonesia, where Inpex has interests in the Tangguh project and a 50% share in the Mahakam block that supplies Bontang LNG, and from Australia, where Inpex participates in Darwin LNG and the proposed Ichthys project.
[Editor’s note: See p. 14 of this issue for an extended analysis of Japan’s energy and LNG present and future.]
In Indonesia, state-owned Pertamina signed an agreement with Mitsubishi and independent producer Medic Energi to build a $1.1 billion, 2-million-tpy liquefaction plant that will ship to Japan starting in 2010.
Mitsubishi will hold 51% in the project, Pertamina 29%, and independent producer Medco 20%. The feed gas will come from Senoro block, which is jointly operated by Pertamina and Medco, and from the Pertamina-operated Matindok Block.
Elsewhere in Asia, LNG World Shipping Journal reported that Guangdong Dapeng LNG Co., which operates China’s only LNG terminal, was in August bringing in LNG at a pace to import 2.6 million tonnes for 2007, up from 687,500 tonnes in 2006. The terminal came on stream in 2006 and is expanding to its nameplate capacity of 3.3 million tpy.
North West Shelf has contracted to send the terminal 3.3 million tpy over 25 years. And Guangdong had, in early August, taken its fourth spot cargo, according to Platts.
Guangdong Dapeng plans to double capacity at the terminal by 2010. And new terminals are under construction at Fujian and Shanghai.
[Editor’s note: For more on China’s LNG picture, see Oil & Gas Journal, Oct. 15, 2007.]
In Korea, Korea Gas Corp. announced in July plans to increase LNG storage capacity by 72% in the next 5 years to meet South Korea’s growing demand for gas and to accommodate seasonal fluctuations in consumption (OGJ Online, July 31, 2007).
The company will construct 20 storage tanks by 2012, split among three LNG terminals-Incheon, Pyeongtaek, and Tongyoung.
The terminals currently contain a total of 40 storage tanks with total capacity of 5.18 billion cu m. The new tanks will provide 3.7 million cu m of additional LNG storage capacity, enough for 42 days of residential use, Kogas said.
Three tanks will be added in 2008, three in 2009, five in 2010, six in 2011, and three in 2012. Large tanks of 200,000 cu m will feature prominently in the program.
Kogas said it was considering construction of a fourth LNG terminal after 2012.
Dependent entirely on LNG for gas supply, South Korea is the world’s second-largest LNG buyer after Japan. Kogas imported 24.27 million tonnes of LNG in 2006, up 8.6% over 2005. The country’s gas consumption will likely increase by at least 50% in the next decade, and Kogas is lining up additional LNG supplies from Russia, Indonesia, Qatar, Yemen, and other suppliers.
Two thirds of the country’s gas consumption occurs during winter months, and Kogas said it arranges LNG swap cargoes with utilities in Japan and Taiwan to ease annual December-March shortages.
The company also has formed a $10 million, 50-50 joint venture with Oman to provide Korea with additional LNG in case of winter supply disruptions. The storage tanks also provide buffer stocks during periods of peak demand.
Western Hemisphere
CB&I signed an engineering, procurement, and construction (EPC) contract for Chile’s first LNG terminal at Quintero Bay, 70 miles northwest of Santiago. The 2.5-million-tpy terminal will be owned by GNL Quintero SA, a joint venture of BG Group PLC with a 40% share; Endesa Chile 20%; Chile’s national oil and gas company ENAP 20%; and gas distribution company Metrogas Chile 20%.
BG will supply 1.7 million tpy of LNG to the project from its portfolio. The terminal is scheduled to start operations in second-quarter 2009.
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In early August 2007, construction teams raised the roof on a third LNG storage tank at Cheniere’s Sabine Pass LNG regasification terminal in southwest Louisiana. These three tanks, of six to be finally built, will have 10.1 bcf of LNG storage capacity. The terminal will begin operations in second-quarter 2008 and have total regasification capacity of 4 bcfd when construction ends in 2009. Photograph from Cheniere Energy Inc. by Mike Kelly.
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In September, Marubeni Corp. signed an SPA with SK Energy to acquire 10% of the Peru LNG project, to be located in the Pampa Melchorita area south of Lima. The project’s international consortium now consists of Hunt Oil Co. (US; 50%), SK Energy (Korea; 20%), Repsol YPF (Spain; 20%), and Marubeni (Japan).
CB&I holds an EPC contract for a single-train, 4.45-million-tpy LNG plant. LNG is to begin flowing in 2010 under an SPA with Repsol YPF. Total project cost is about $3.8b.
In Mexico, the nation’s second LNG terminal and the first on the entire western coasts of the Americas is well on its way to opening later this year or early 2008. Energía Costa Azul, under development in Baja California, Mexico, by Sempra Energy unit Sempra LNG, will initially be able to send out as much as 1 bcfd of Pacific Rim-produced natural gas to Mexican and US markets.
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The first LNG regasification terminal on the western coasts of the Americas will open later this year or in early 2008. Sempra LNG’s Energía Costa Azul in Baja California, Mexico, shown here in August more than 80% complete, will initially be able to send out as much as 1 bcfd of Pacific Basin-produced natural gas to Mexican and US markets. Photograph from Sempra Energy.
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In the US in late August, Waterborne Energy Inc., Houston, reported that cargoes to date and likely incoming shipments for the rest of 2007 will reach 19.3 million tonnes, setting a new annual record and nearly 60% ahead of the 12.3 tonnes received in 2006.
Imported LNG for the first 8 months of 2007 reached 14.5 tonnes, as much as came in through all of 2004, the previous record year for US LNG imports.
This year, the US is competing with Spain to be the world’s third-largest LNG importer. Once expansions at three of the five existing US terminals and construction of four new terminals are completed, however, the US should easily outpace Spain in the next 3 years.
CB&I signed an EPC contract for expansion of Southern LNG Inc.’s terminal at Elba Island, Ga. CB&I will build a 200,000-cu-m storage tank-largest in North America-that will increase the terminal’s LNG storage capacity by more than 50% to 11.5 bcf and add 540 MMcfd of sendout to increase capacity to 1.7 bcfd by 2010.
At the end of June, Dominion Cove Point resumed operations of its terminal at Cove Point, Md., following a month-long shutdown to allow tie-in work. The terminal’s expansion will add two storage tanks, bringing the number to seven with a total capacity of 14.6 bcf; 800 MMcfd of sendout capacity for a total of 1.8 bcfd; and construction of 81 miles of new pipeline in Pennsylvania and 48 miles in Maryland. CB&I also holds this contract; it built the existing five storage tanks at Cove Point.
Along the Gulf Coast, the US Federal Energy Regulatory Commission staff has issued the final environmental impact statement for the proposed Calhoun LNG terminal and pipeline project at Port Lavaca-Point Comfort in Calhoun and Jackson Counties, Texas. The project, which is being developed by Gulf Coast LNG Partners LP, would have two 160,000-cu-m storage tanks and sendout capacity of around 1 bcfd. Operations would begin in 2009-10.
Similarly, on the West Coast, FERC has issued a favorable draft EIS for the proposed Bradwood Landing LNG terminal on the Columbia River in Oregon. Bradwood Landing’s owner NorthernStar Natural Gas plans two 160,000-cu m, full-containment storage tanks to be augmented by a third if needed.
Europe
In July, OAO Gazprom named France’s Total SA as its partner for the first phase of the much-discussed Shtokman project in the Barents Sea, ending years of discussions over a field that will ultimately supply gas to both Europe and North America. Gazprom intends to start shipments in 2013 through the Baltic Sea’s Nord Stream pipeline and LNG deliveries in 2014 to North America.
Total will receive a 25% stake in a special-purpose company formed to plan, finance, and construct the project’s infrastructure. Gazprom intends to award another 24% in the special company to one or more foreign partners but remain sole owner of the company holding license to develop the field.
Gazprom estimates output from first phase of the project to be about 23.7 billion cu m/year and Shtokman’s total reserves at some 3.7 trillion cu m (more than 129 tcf).
Also in the Barents Sea, Statoil has delivered first gas through a 90-mile pipeline from the Snøhvit field to its single-train 4.2-million-tpy Hammerfest liquefaction plant on Melkøya Island. The first cargo is expected to be shipped in October.
Statoil is operator with 33.53% interest; other participants are Petoro 30%, Total 18.4%, Gaz de France 12%, Hess 3.26%, and RWE Dea 2.81%.
The UK in July received its first LNG cargo in nearly 4 months when the Berge Arzew unloaded at Isle of Grain. Capacity in the terminal, operated by National Grid, is held by BP and Algeria’s Sonatrach.
Higher prices in the US drew LNG away from the UK, especially after the opening of new pipelines from Norway and the Netherlands drove prices down. UK gas prices rose again, however, after a pipeline from Norway was closed.
In other UK developments, British Gas Trading Ltd., subsidiary of Centrica PLC, and Asean LNG Trading Co. Ltd., subsidiary of Malaysia’s Petronas, terminated their 15-year LNG SPA signed in August 2004 “due to certain conditions precedent in the contract not having been satisfied.” No details were disclosed.
Under the contract, Petronas would have delivered up to 3 billion cu m/year to the Dragon LNG terminal at Milford Haven in Wales starting in 2007. The 6-billion-cu m capacity terminal is owned by Petronas 30%, BG Group 50%, and Petroplus 20%. The LNG was to have come from Petronas’s portfolio of supply sources, including Malaysia and Egypt, where Petronas has a 35.5% share in Train 1 and a 38% share in Train 2 of the Egyptian LNG plant at Idku.
In Belgium, Fluxys LNG announced in August it had received an €85-million loan from the European Investment Bank to double capacity of the Zeebrugge LNG regasification terminal to 6.6 million tpy. The company said the increased capacity has been fully booked on a long-term basis (OGJ Online, Aug. 9, 2007).
Fluxys is adding extra regasification infrastructure and a fourth LNG storage tank under a €165-million investment plan. Commissioning of the expansion was to begin by yearend.
Fluxys LNG, with a 93.20% stake, owns and operates the Zeebrugge terminal.
Zeebrugge may well be the site of the world’s first fixed ship-to-ship transfer facility, if the Belgian shipping company Exmar NV can gain approval from the Brugge-Zeebrugge Port Authority. It filed its application in August to build the LNG transfer installation and high-pressure natural gas discharge connection (OGJ Online, Aug. 2, 2007).
The facility would resemble UK’s Teesside Gas Port plant but also could handle transshipment of LNG between carriers, said Exmar. Currently, Zeebrugge has Belgium’s only conventional jetty to discharge LNG, operated by Fluxys.
Exmar said its project aims to increase options for bringing natural gas to Belgium and strengthening the country’s position as a supply and gas transit center.
Exmar is working with Ondernemingen Jan De Nul, Praxair Inc., Jacobs Engineering Group Inc., ERM Benelux in Belgium, and Ecolas NV in planning construction and development of the facility. The infrastructure is designed for the simultaneous berthing of two LNG carriers, either conventional or regasification vessels (LNGRV) capable of regasifying LNG on board and injecting gas directly into the national distribution grid.
In Germany, RWE Gas Midstream announced plans in July to develop an LNG import terminal at Wilhelmshaven in northern Germany. German GasPort will use Excelerate Energy’s shipboard regasification technology to deliver the gas directly into the German grid (OGJ Online, July 9, 2007).
RWE, with Excelerate and Nord-West Oelleitung GMBH, plans to deliver as much as 600,000 cu m/hr of regasified LNG into the German network starting by yearend 2010.
The partners will carry out technical and financial studies over several months as they work to secure permits from various authorities concerning marine, environmental, and pipeline connections.
The company said German GasPort is a dockside regasification application, a land-based manifold that will connect to a high-pressure gas arm on Excelerate’s Energy Bridge regasification vessels.
Africa, Middle East
In North Africa, Sonatrach awarded a $2.8 billion-EPC contract to KBR for a new 4.5-million-tpy LNG export train at the Skikda plant, associated LPG and condensate recovery, and precomissioning and commissioning. The new train will replace three units with a combined capacity of 2.7 million tpy destroyed in a January 2004 explosion.
In early September, however, Sonatrach terminated an agreement with Spain’s Repsol YPC and Gas Natural to develop the integrated Gassi Touil project, citing delays in the investment plan, and now plans to develop it alone. Start-up for the project has been pushed back to 2001 from 2009.
So far $600 million has been invested in the project 39% of it from Repsol, 26 % from Gas Natural, and 35 % by Sonatrach. The initial agreement signed in November 2004 called for the drilling of 52 developmental wells, production of 22 MM cu m/day of gas, and construction of a 4-million-tpy liquefaction plant over 54 months.
The two European companies decried the action as unlawful and threatened international arbitration in response.
In West Africa in June, Brass LNG awarded Bechtel Corp. a contract for work on the proposed Brass LNG plant. Bechtel will prepare the site and construct a camp and construction dock, permanent operator housing and amenities, marine facilities, common facilities and support services, tankage, utilities and offsite, and others.
Brass LNG will process 10 million tonnes/year of LNG in two separate trains beginning late 2010 or first-half 2011 for export to the US and Europe.
Suez LNG Trading SA has signed a memorandum of understanding with Brass LNG to buy 2 million tpy of LNG for 20 years. BP PLC has also agreed to buy 2 million tpy of LNG starting in 2010.
Current partners are Nigerian National Petroleum Corp. 49%, Italy’s Eni SPA 17%, Total SA 17%, and ConocoPhillips 17% (OGJ Online, June 7, 2007).
In Qatar, Qatargas Liquefied Gas Co. Ltd. has secured more than $4 billion in financing for its 7.8-million-tpy Qatargas 4 project, a joint venture of subsidiaries of QP (70%) and Royal Dutch Shell (30%). Project costs have risen to $8 billion from an initial estimate of $6-7 billion. When production starts up around 2010, the project will sell LNG to a Shell subsidiary for export, mainly to the North American market.
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Work progresses earlier this year on the Qatargas 2 expansion project, a joint venture between Qatar Petroleum, ExxonMobil, and Total. The company calls it the world’s “largest integrated LNG project from wellhead to customer” and says it will start up next year. When fully operational, Qatargas 2 will supply up to 16 million tonnes of LNG to Europe, mainly to the UK, says the company. Photograph from Qatargas.
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In a separate agreement, Shell was appointed shipping manager for 25 tankers owned by Nakilat (Qatar Gas Transport Co.) that will serve four Qatari LNG projects (Qatargas 2, 3, and 4 and RasGas 3). Operational management is to be transferred to Nakilat within 12 years. The ships, all under construction in Korea, will have capacities ranging from 210,000 to 266,000 cu m.
Ras Laffan Liquefied Natural Gas Co. Ltd. (RasGas 2) has signed a short-term agreement with India’s Petronet LNG to supply 20 cargoes (around 1.25 million tpy) and a medium-term (around 4.5 years) agreement with EDF Trading Ltd. for interruptible deliveries of up to 3.4 million tpy delivered ex-ship at Belgium’s Zeebrugge terminal.
Volume 4 Issue 4
Oct 01, 2007
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