Bechtel's $900 Million Contract as Egypt Joins LNG Export Majors

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). Egypt is set to become a significant liquefied natural gas (LNG) exporter and the country will receive substantial economic benefit from the Egyptian LNG project (ELNG). A $900 million contract for engineering, procurement and construction of the ELNG plant Train 1 and common facilities was awarded to Bechtel Corporation (San Francisco, California) by BG Group (British Gas) (LSE:BG) (London, United Kingdom) and partners in September.

An LNG natural gas sale and purchase agreement for the sale of the entire output of Train 1 has been entered into by BG and partners with Gaz de France (Paris, France). A participation agreement, which anticipates Gaz de France becoming a partner in the ELNG project, has also been signed.

An invitation to lenders to project finance the construction of Train 1 and the common facilities was issued in September and a preliminary information memorandum released to international lending institutions. Invitations to tender for the upstream engineering, procurement, installation and commissioning (EPIC) contract for production of the gas that will supply the plant, were issued in August.

The ELNG plant is located at Idku, about 50 kilometers east of Alexandria. It will be a tolling facility and will provide a liquefaction service to BG and its partners, Edison International NYSE:EIX) (Rosemead, California) and Egyptian General Petroleum Company (EGPC), who have formed the West Delta Deep Marine (WDDM) concession to sell the gas.

The ENLG project is maintaining and aggressive schedule and has attracted strong interest from international and Egyptian banks. Since first gas discoveries made in 1999 the project represents one of the fastest LNG export plants developed in the industry.

Bechtel started an early works program in May and first LNG production is scheduled for the third quarter of 2005. Engineering is well advanced, equipment with long delivery times has been ordered and site work has started with more than 500 workers preparing the site for civil engineering and construction works.

An innovative commercial structure will allow third parties to invest in future LNG production trains at the site. The Idku site can accommodate up to six long trains. The plant will use the Phillips Cascade liquefaction technology and is based on the successful Atlantic LNG plant developed by BG and partners in Trinidad and Tobago. The WDDM concessionaires are marketing the output of the proposed Train 2 to potential buyers in Europe and the USA and expect to finalize heads of terms agreements by the end of this year.

Gaz de France will purchase 3.6 million tons of LNG per annum, which represents the full output of Train 1, for a 20 year period. Under the participation agreement, Gaz de France will acquire a 5% ownership in ENLG. BG holds 35.5%, Edison International 35.5% Egyptian Natural Gas Holding Company (EGAS) 12% and the EGPC 12%. The BG operated WDDM concession will supply the gas from offshore the Nile Delta.