Chiyoda Corp., the Japanese engineering company with seven large-scale recent, current and future liquefaction contracts, has posted operational losses related to several LNG projects, including the Cameron LNG export plant in Louisiana being constructed in a joint venture with US firm McDermott International.
McDermott issued a statement after Chiyoda outlined losses on Cameron LNG and the Tangguh project in Indonesia.
McDermott said it would also be taking a hit on the Cameron engineering contract joint venture.
“Losses are mainly due to an increase in incremental construction costs for the Cameron LNG project,” said Chiyoda in its fiscal third-quarter earnings report.
In the financial results, Chiyoda posted an operating loss in the third fiscal quarter of 107.79 billion yen ($972 million), due to “significantly increased construction costs for ongoing LNG projects” and cited the Cameron LNG project of Sempra Energy and the Tangguh LNG expansion in Indonesia being built for operator BP of the UK.
Chiyoda, McDermott and the US Zachry Group have additionally just been awarded an engineering, procurement and construction contract for the Golden Pass export plant in Texas by Qatar Petroleum and ExxonMobil.
“The company expects a deterioration of cash flow and new financing may be required early in the next fiscal year,” stated Chiyoda.
“Under this circumstance, the company recognizes that events and conditions may cause substantial doubts about its ability to continue as a going concern,” stated Chiyoda.
“In addition, Chiyoda is implementing countermeasures to reduce costs, obtaining change orders, reviewing settlement conditions from ongoing projects including the Cameron LNG project, as well as making efforts to improve its cash flow,” said the Japanese company.
One of Chiyoda’s main shareholders is the trading house, Mitsubishi Corp.
Chiyoda has also been involved in several other LNG projects, including Ichthys LNG in Australia for Inpex Corp. and its partners and the Yamal LNG venture in Russia for Novatek, Total and Chinese stakeholders.
“Furthermore the company has been actively involved in front-end engineering and design work (FEED) for the Qatar expansion project, and FEED and engineering, procurement and construction (EPC) proposal preparation work for Nigeria LNG Train 7,” explained Chiyoda.
Chiyoda’s partner in Cameron LNG, McDermott, said it would be posting a fourth-quarter charge estimated at around $168M.
“The charge is due to unfavorable labor productivity, and increases in subcontract, commissioning and construction management costs,” said the US company.
McDermott noted that the Cameron LNG project, currently under construction in Hackberry, in Louisiana, was a world-scale facility incorporating proven technology and designed to produce nearly 14 million tonnes per annum of LNG.
“Operationally, the project is on track to reach a major milestone with feed-gas being introduced into the facility later this quarter,” said McDermott.
“Construction continues to progress well. The gas turbine solo run was completed ahead of schedule, cold circulation of hot oil in Train 1 was completed during the quarter and flare ignition testing was successfully completed on all flares,” added the US company.
“All of these are crucial steps in the commissioning of Train 1,” stated McDermott in its Cameron project update.
McDermott said it expected to report its fourth-quarter results on February 25 with the charge included.