Foster Wheeler, Worley Parsons and KBR Awarded FEED Contracts for Australia's Woodside Pluto LNG Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--KBR Incorporated (NYSE:KBR) (Houston, Texas) and a joint venture formed by Foster Wheeler (NASDAQ:FWLT) (Clinton, New Jersey) and Worley Parsons Limited (ASX:WOR) (Sydney, Australia) have been awarded front-end engineering and design (FEED) contracts by Woodside Petroleum Limited (OTC:WOPEY) (Perth, Australia) for trains 2 and 3 of the company's Pluto Liquefied Natural Gas (LNG) project.

The Pluto LNG Project was intitated to harness the gas reserves of Xena and Pluto gas fields, discovered in 2005 at the Canrarvon Basin off the coast of Western Australia. Work is under way on a single-train LNG-processing unit, in addition to the construction of other onshore infrastructure, including an export jetty and storage units. Established at a cost of $11.2 billion, LNG train 1, with an estimated output capacity of 4.3 million tonnes of natural gas per year, is expected to ship its first consignment of LNG by the end of 2010. It will also earn the distinction of being the world's fastest developed LNG venture, taking just five years from gas discovery to commercial production. The Foster Wheeler-Worley Parsons venture is also involved in the engineering, procurement and construction of train 1.

The FEED contract comes in the wake of expansion operations to be undertaken at the Pluto plant, where Woodside is looking to initially add two more trains with a capacity similar to the first train, effectively raising the project's total LNG capacity to 12 million tons per year at an estimated investment of $28 billion. Long-term plans include setting up a fourth and fifth train at the site, eventually increasing the capacity of the facility to more than 20 million tons per year.

The scope of the current contract includes managing the procurement and construction phases of trains 2 and 3 in addition to design and engineering activities. The FEED costs have been estimated to be between $93.34 million and $140 million. Woodside chose to settle for two FEED contracts, parallelizing due diligence for the expansion venture in order to complete the FEED studies early and get the second train approved by 2010. The studies are expected to be completed in the second half of 2010. Train 2 is slated to begin operations in 2013, and train 3 in 2014.

The Pluto expansion project, if completed on time, is likely to provide Woodside a head start in Australia's natural gas sector, pushing it ahead of the competition from Chevron Corporation's (NYSE:CVX) (Chevron) (San Ramon, California) Gorgon gas project due to be complete in 2014 and the Wheatstone LNG project, scheduled to start operations in 2016. However, Woodside's progress has been slightly hampered by Chevron's wooing potential gas suppliers Kuwait Foreign Petroleum and Exploration Company (Safat, Kuwait) and Apache Energy Limited (Perth), a subsidiary of Apache Corporation (NYSE:APA) (Houston, Texas), by offering a combined 25% stake in the Wheatstone LNG project in return for gas from the companies' Julimar and Brunello fields.

To remain in the race, Pluto requires about 15 trillion cubic feet of gas for the facility's proposed five trains to remain active during the next 15 years. About 3.8 trillion cubic feet is required to feed train 2, and 7.6 trillion cubic feet is required to feed train 3 in the short term. Gas requirements are expected to be met by a combination of Woodside's additional exploration operations in the Greater Pluto zone, as well as by supplies from other gas companies active in the region, including Hess Corporation (NYSE:HES) (New York, New York).

During the next year and a half, Woodside plans to set up 21 gas wells across 40 pre-identified potential gas pockets in five major zones of the Carnarvon Basin. With a predicted success rate of between 15% and 52%, Woodside is optimistic of striking natural gas deposits of between 500 billion cubic feet and 10 trillion cubic feet.

The International Energy Agency (Paris, France) has predicted a 50% increase in the global gas sector through 2030. Woodside, looking for a share of this lucrative sector, is set to become a key force in the market. In addition to Pluto, the company has other LNG projects, including the Sunrise and Browse projects, already in the pipeline.

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