LNG Canada looks for new lead contractor on $40-billion proposal for Kitimat
by Derrick Penner, Vancouver Sun, December 10, 2016
The consortium proposing a $40 billion liquefied natural gas development at Kitimat is calling for bids to find a new lead construction contractor looking to shore up costs while the project is under an indefinite delay.
Shell-led LNG Canada initially awarded the contract in 2014 to a consortium of engineering firms under the name CFSW LNG Constructors, but this week, in a statement, said it “is now undertaking a new competitive process” to pick its lead construction contractor.
“In the current industry and market context, cost competitiveness and affordability of the lNG Canada project remain a challenge,” said Susannah Pierce, LNG Canada’s director of external relations in an emailed statement.
LNG Canada, which is a consortium of Shell Canada, Kogas, PetroChina and Mitsubishi, isn’t alone in grappling with the high costs of new projects in what remains a tough market for energy companies.
The global LNG market has hit a period of oversupply, which has driven down LNG prices squeezing margins in the business plans for proposed projects. And low oil prices have robbed major producers, such as Shell, of cash flow they need to finance multi-billion-dollar LNG developments.
Pacific NorthWest LNG, the major plant proposed for Prince Rupert and led by the Malaysian state-owned firm Petronas, is also repricing elements of its project before making a final decision, which is expected in the first half of 2017. It was due to make a decision by the end of December.
LNG Canada was also expected to make a final investment decision by the end of 2016, but in July announced that it postponed that deadline indefinitely.
Friday, in her statement, Pierce said the delay allowed the company to “return to market and rebid the construction contract in an effort to ensure the project remains cost competitive and affordable.”
LNG Canada, in May of 2016, signed a deal with CFSW LNG Constructors as its lead contractor to handle design work, referred to in the industry as front-end engineering and design, and “project execution services, subject to a final investment decision.”
The industry news website Upstream, this week, reported that CFSW had abruptly cancelled a tender for the fabrication of LNG production modules.
Pierce, in her statement, said LNG Canada has embarked on a competition with a pre-qualified group of companies to find a new prime contractor which will be responsible for managing all design and construction work required to build its project.
LNG Canada has already received key regulatory approvals including an export license from the National Energy Board, provincial and federal environmental approvals and a permit from the B.C. Oil & Gas Commission.
“LNG Canada is a fundamentally strong project,” Pierce wrote. “The project has been delayed and not cancelled. We do not have a new fixed date (for a decision) from the joint-venture partners.”
Posted on December 10, 2016, in Oil & Gas, Uncategorized and tagged Kogas, liquefied natural gas, LNG Canada, Mitsubishi, Pacific NorthWest LNG, PetroChina, Shell Canada. Bookmark the permalink. 2 Comments.