Chiyoda and Bechtel to Make Competitive Bids for Papua New Guinea's First Liquefied-Natural-Gas Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Bechtel Group (San Francisco, California) and Chiyoda Corporation (TYO:6366) (Yokohama, Japan) will make final bids for an engineering, procurement and construction (EPC) contract to build Papua New Guinea's first liquefied-natural-gas (LNG) plant. Esso Highlands (Port Moresby, Papua New Guinea), a fully owned subsidiary of ExxonMobil (NYSE:XOM) (Houston, Texas) and operator of the LNG project, announced that both companies will submit their design and costing proposals soon.

The estimated $11 billion LNG plant will be located 20 kilometers northwest of the country's capital, Port Moresby. The project, an integrated upstream and downstream facility, has been planned as a complete LNG chain from the sourcing of gas to transporting the final product to customers. While Esso Highlands holds a 41.5% stake, Santos (NASDAQ:STOSY) (Adelaide, Australia) holds 17.7%, Oil Search Limited (ASX:OSH) (Sydney, Australia) holds 34%, and Nippon Oil Corporation (TYO:5001) (Tokyo, Japan) holds 1.8%. The state-owned Mineral Development Company Limited (Port Moresby) has a 1.2% stake, while AGL Energy Limited (ASX:AGK) (Sydney) and EDA Oil Limited, part of Petromin PNG holdings (Port Moresby), hold 3.6% and 0.2%, respectively. AGL Energy is in talks to sell its share in this enterprise. It is also indicated that the current holding stakes in the project will be revised once government-nominated companies take over. For related information, see December 18, 2008, news article - ExxonMobil-Led Consortium to Develop LNG Project in Papua New Guinea.

The project complex will consist of gas processing facilities, pipeline network, an LNG plant and associated infrastructure. The facility will also have a 2.3-kilometer trestle (a bridge that is supported by strong frames), which will assist in loading tankers, liquefied-petroleum-gas recovery units, two 125,000-cubic-meter storage tanks and a 50,000-barrel storage facility for condensate. The EPC contract is likely to be awarded by the end of 2009, and construction will commence in 2010. The first gas exports are expected by 2013-14. EOS, a 50:50 joint venture between WorleyParsons Limited (ASX:WOR) (Sydney) and KBR (NYSE:KBR) (Houston, Texas), will execute the front-end engineering and design (FEED) for the upstream components after which the EPC contractor will be finalized. KBR completed the pre-FEED study for the downstream project. The upstream FEED will be carried out from Brisbane. FEED services will include engineering design, project financing options, gas marketing strategies and regulatory affairs.

The construction of the proposed two-train, 6.3-million-ton-per-year LNG plant will include liquefaction and treatment units, inlet processing facility, storage and loading systems. ExxonMobil will also lease or procure 220,000-cubic-meter ships to transport gas to Asian markets. The Kutubu and Agogo processing units will treat the condensate that will be available as part of the process and transport it through the Kumul export terminal. Chiyoda plans to utilize the liquefaction technology developed by Air Products & Chemicals International (NYSE:APD) (Allentown, Pennsylvania) for the project while Bechtel will use the popular optimized cascade process technology developed by ConocoPhillips (NYSE:COP) (Houston). Both companies have demonstrated success in the execution of LNG projects, with Chiyoda completing the construction of ExxonMobil's project in Qatar and Bechtel handling the EPC for ExxonMobil in Angola.

The feed for the LNG plant will come from the newly discovered fields in Juha, Hides and Angore, which have reserves of about 3 trillion to 4 trillion cubic feet. There are plans to increase the number of LNG trains from the proposed two to five. Work is also in progress to study the possibility of a third train, which is expected to tap new gas reserves of about 2 trillion cubic feet. But no expansion dates have been set. The 960 million-cubic-feet-per-day gas-conditioning plant at the complex will receive feed through a 700-kilometer long pipeline, which will consist of 403 kilometers of a sub-sea network. In 2008, ExxonMobil presented an environmental impact statement to Papua New Guinea's government. The statement, which took more than 18 months to complete, was planned in early 2007 with more than 25 field studies conducted covering more than 70 villages in the 700-kilometer pipeline route. ACIL TASMAN (Melbourne, Australia) conducted the study for ExxonMobil.

The LNG plant in Papua New Guinea is a step to exploit the abundant natural gas reserves in the country. Located in the southwest Pacific Ocean, Papua New Guinea has mountainous terrains with large deposits of natural gas, crude oil, gold and copper ore. The project is expected to generate tax revenues in excess of $20 billion for the government over the 30-year project period. The country's gross domestic product, which was around 4% in 2007 is expected to double after the LNG project is commissioned.

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