Hyundai Heavy Industries Secures $2 Billion Contract to Supply Fabrication Modules for Australia's Gorgon LNG Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Hyundai Heavy Industries Company Limited (SEO:009540) (Ulsan, South Korea) has secured a $2.06 billion contract to supply fabricating modules for the massive Australian Gorgon liquefied natural gas (LNG) project off the West Australian coast.

The contract is the largest ever awarded to Hyundai amid keen competition from Daewoo Shipbuilding & Marine Engineering (SEO:042660) (Seoul, South Korea), Samsung Heavy Industries Company Limited (SEO:010140) (Seoul) and McDermott International (NYSE:MDR) (Houston, Texas).

Under the terms of the contract, Hyundai will supply 48 fabricating modules for the LNG plant at Barrow Island. The modules will be delivered 2012-13, in time for the first production of LNG, which is scheduled for 2014. The fabricating modules are normally applied to floating offshore platforms, a technology in which Hyundai has good experience, but this is the first time that the concept will be applied to land-based LNG plants.

In another move for the Gorgon project, GE Oil and Gas (Florence, Italy), a division of General Electric Company (NYSE:GE) (Fairfield, Connecticut), has secured a $400 million contract to supply equipment required to drive compression trains for the Gorgon LNG and carbon dioxide sequestration projects.

GE will supply three main refrigerant compression trains, each of which includes two GE Frame-7 gas turbines and liquefaction compressors, which will cool the natural gas to minus 160 degrees Celsius (minus 256 degrees Fahrenheit). GE will also supply six surface-operating 15-megawatt electric compression trains to drive Gorgon's carbon dioxide sequestration project, the largest of its kind. Carbon dioxide extracted from natural gas prior to liquefaction will be injected into depleted natural gas wells to a depth of 1,300 meters.

The main refrigerant trains and compression trains will be manufactured in Florence and Massa in Italy before being shipped to the Gorgon site in 2011 and 2012. The award of the contract follows another five-year contract awarded to GE in May 2008 to supply undersea equipment and support services.

Last month, it was announced that Kellogg Joint Venture Gorgon (KJVG) had been awarded a $2.49 billion contract to supply engineering, procurement, construction and management services for the LNG downstream and logistics portion of the Gorgon project. KJVG is 30% owned by KBR Incorporated (NYSE:KBR) (Houston, Texas), 30% by JGC Corporation (TYO:1963) (Tokyo, Japan) and 20% each by Clough Limited (ASX:CLO) (Perth, Australia) and global consultants Hatch Limited (Mississauga, Ontario).

The contract includes the construction of the main LNG facility on Barrow Island, together with a 300-terajoule-per-day domestic gas plant. KJVG will also develop a comprehensive quarantine management plan for Barrow Island, the latter being an essential requirement, given Australia's strict quarantine requirements.

The recent awarding of contracts to Hyundai and GE brings the total amount of work awarded by the Gorgon stakeholders to $9.46 billion to date. The first phase of the project is expected to cost about $43 million. Stakeholders in the Gorgon LNG project include Chevron Corporation (NYSE:CVX) (San Ramon, California) with a stake of 50%, Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) with a stake of 25%, and Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) with a stake of 25%.

The Gorgon project will collect and liquefy natural gas from 11 gas fields between 130 and 200 kilometers off the coast. The production target has been set at 15 million tons of LNG per year, but this target may be increased next year, according to Chevron. The project is scheduled to begin production in 2014.

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