Qatargas delays cost Technip $295M earnings cut

Wednesday, 30 January 2008

Qatargas II, which will supply the UK with LNG, has been the subject of speculation regarding progress and analysts had been expecting Technip to signal a possible impact on earnings in its last quarterly statement.

The French company said that itself and Chiyoda have just reached an agreement with Qatargas II, “details of which would remain confidential”, that permits the joint venture “to stop financial performance deterioration and improve project execution.”

Technip said that based on the outcome of negotiations, the status of current discussions and of physical progress of construction on site “and as reflected in the updated estimated results at completion of all four projects,” Technip had decided to take a charge on its earnings.

“As a result of signature of the agreement with Qatargas II, we have reached an important step which significantly clarifies the situation of our gas projects in Qatar,” said Technip Chief Executive Thierry Pilenko.

Technip announces its full-year results on February 21, when more details could emerge, along with further possible write-downs.

With more than $7.6 billion in international financing, Qatargas II will deliver around 15.6 million tonnes per annum of LNG to the UK and Europe over 25 years, with the first deliveries expected later this year.

Qatargas II, which has also established several affiliates to manage the various elements of this integrated project, is a joint venture between the state-run Qatar Petroleum and ExxonMobil.

The scale of the project outclasses previous LNG developments and it’s no surprise the venture has run into some problems.

The Qatargas II involves the construction of two of the largest LNG liquefaction Trains in the world (Trains 4 and 5), with capacity to produce 7.8 MTPA. The Trains are being installed beside the three Trains of Qatargas I and will benefit from existing infrastructure.

A receiving terminal for much of the Qatargas II LNG is near completion at Milford Haven in the UK. A fleet of 16 of the largest LNG carriers is currently being established to transport the LNG to the Atlantic Basin and probably elsewhere.