LNG

The Freeport LNG export plant on Quintana Island in Texas was reached the final commissioning stage for the third Train with feed-gas now being introduced.

The delayed Freeport LNG export project at Quintana Island in Texas is moving forward on its expansion plans by selecting a preferred bidder for the fourth processing Train, even as it has still to complete its first Train and to start the plant.

Chiyoda Corp., one of the leading Japanese LNG engineering companies, has named Kazushi Okawa as its new Chairman and Chief Executive to lead turnaround efforts after it suffered large losses on contracts and a plunge in its shares.

Mitsubishi Corp. of Japan is planning to refinance the Japanese energy and LNG engineering company Chiyoda Corp. with a capital injection of at least $1.4 billion to help it recover from project setbacks and to secure some of the liquefaction plant work in a new wave of forthcoming contracts.

Qatar has said that qualified shipyards in South Korea were being invited to participate in a tender for the provision of newbuild slots for dozens of LNG carriers required for the expansion of the Gulf nation’s North Field resources and the building of up to four new processing Trains.

Chiyoda Corp., the Japanese LNG engineering company, said it was still working on its recovery plan from the more than $1 billion of losses incurred from significantly increased project construction costs, particularly at the Cameron project in Louisiana being built by Sempra Energy.

McDermott International, the energy and LNG engineering company, posted fourth-quarter earnings seriously impacted by $2.2 billion in charges and other items related to the Cameron LNG and Freeport LNG projects in Louisiana and Texas and the Calpine gas-fired power venture in Pennsylvania.

JGC Corp. of Japan, one of the leading global energy engineering companies, has posted lower sales and income in the third quarter of its fiscal year as it prepared to take on the LNG Canada liquefaction and export project in British Columbia.

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.

Qatar Petroleum and ExxonMobil have made a final investment decision to proceed with development of the Golden Pass LNG export project in Texas and have awarded construction contracts to a US-Japanese consortium for work to begin within weeks and for the facility to be operational in 2024.

“Golden Pass will provide an increased, reliable, long-term supply of liquefied natural gas to global gas markets, stimulate local growth and create thousands of jobs,” said ExxonMobil Chairman and Chief Executive Darren Woods.

An engineering consortium comprising McDermott and Zachry Group of the US and Japan’s Chiyoda Corp. have been awarded the contract to build the plant.

“The extensive experience of ExxonMobil and Qatar Petroleum provides the expertise, resources and financial strength needed to construct and operate an integrated liquefaction and export facility in the US,” added Woods.

The Golden Pass project is located on the Sabine-Neches Waterway in Texas. It is 70 percent-owned by Qatar Petroleum while ExxonMobil holds the remaining 30 percent stake, having acquired 15 percent from former shareholder ConocoPhillips.

Originally designed as an import facility before the shale-gas revolution, Golden Pass will be reconfigured at a cost of more than $10 billion to export up to 15.6 million tonnes per annum of LNG.

“It is expected to create about 9,000 jobs over the five-year construction period and more than 200 permanent jobs during operations,” said ExxonMobil.

McDermott, Chiyoda and Zachry will perform engineering, procurement, construction and commissioning of three Trains, each with capacity to produce 5.2 MTPA.

“McDermott has extensive experience in executing major projects along the US Gulf Coast,” said Richard Heo, McDermott's regional Senior Vice President.

“We will apply not only our vertically-integrated capabilities but also some of the best practices and lessons learned for major construction projects in the region,” he explained.

“We will also leverage the existing relationships we have with our partners and our customers to ensure that the Golden Pass project is a success,” stated the McDermott executive.

Golden Pass is part of ExxonMobil’s plans to invest more than $50 billion over the next five years to build and expand manufacturing facilities in the US.

“This project builds upon the successful international relationship between ExxonMobil and Qatar Petroleum, with Qatar Petroleum joining ExxonMobil in exploration and development activities in Argentina, Brazil and Mozambique,” said the US major.

The US Federal Energy Regulatory Commission has already approved the Golden Pass project, concluding that it “would result in some adverse environmental impact, though impacts would not be significant with implementation of proposed mitigation” by the developers and the regulators.

ExxonMobil has extensive assets in the US Gulf Coast area and is the biggest leaseholder in the Permian Basin, which it owns in parallel with pipelines and petrochemical infrastructure and plants that extend from South Texas into Louisiana.

The FERC has also approved permits for the associated Golden Pass Pipeline linking the plant to the major pipelines bringing in shale-gas resources.

ExxonMobil’s growing Gulf expansion programme consists of 11 major chemical, refining, lubricant and energy projects at proposed new and existing facilities along the Texas and Louisiana coasts.