KBR Consortium Wins $1.7 Billion Nigerian GTL Contract as Algeria Starts $3 Billion GTL Tender Process

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). The $1.7 billion engineering, design, and procurement contract for the Escravos GTL project in Nigeria's Delta province has been awarded to Halliburton's (NYSE:HAL)(Houston, Texas) Kellogg Brown & Root (KBR) consortium, which includes Japanese Gas Corporation (JGC) (TSE:1963) and Snamprogetti (NYSE:ENI). The consortium's work on the project will be directed from KBR's offices in Houston.

The contract award was announced by the Escravos GTL project owners, the Nigerian National Petroleum Corporation (NNPC) (Lagos, Nigeria), and Chevron Nigeria Limited (CNL) (NYSE:CVX) (San Ramon, California). CNL will own 75% of the project, and NNPC the 25% balance. The project will use Sasol's Slurry Phase Distillate (SPD) Fischer -Tropsch (F-T) process, and Sasol is reported to be providing 50% of the risk-based portion of the project finance. Returns on this finance would be based on the performance of the plant, and a spokesman said that Sasol (NYSE:SSL) (Johannesburg, South Africa) expected these returns to be 'attractive'. The company will earn a licensing fee from the supply of its technology.

The Escravos plant is scheduled to produce 34,000 bpd of GTL products, including GTL diesel, GTL naphtha, and a small amount of liquefied petroleum gas (LPG).

Major automakers, including DaimlerChrysler (NYSE:DCX)(Stuttgart, Germany) are following the progress of GTL plants with interest, as GTL diesel is very low in aromatics and has almost no sulfur content, thus reducing environmentally negative emissions. GTL is claimed to have a power rating (cetane) of almost 50% greater than the cetane rating of traditional diesel, which allows for a reduction in noise and exhaust smoke, together with improved cold start properties and overall performance. GTL diesel is compatible with existing diesel technology and the existing distribution infrastructure.

A few days before the Nigerian announcement, Sasol reported that two 60-meter-long technology reactors have been shipped from Japan for the $1 billion Oryx GTL project in Qatar. The 2 x 2000-ton reactors manufactured by Ishikawajima-Harima Heavy Industries (IHI) (TSE:6321 ) in Yokahama are ten meters in diameter and are scheduled to arrive in Qatar by the middle of this month (April). The 34,000 bpd project is 80% complete, and production of premium GTL diesel and GTL naphtha will begin in the first quarter of 2006. Currently producing 160,000 bpd of GTL in South Africa, Sasol is aiming at 500,000 bpd globally by 2013.

In Algeria the state energy group, Sonatrach, has launched an international tender competition for the country's first GTL project, which will require an investment estimated at $3 billion. The Tenders Bulletin of the Energy and Mines Sector (Baosem) said that the results of the tendering process would be announced on December 20, 2005.

The integrated project will run for 30 years and is based on the Tinhert gas field. The area up for bidding has proven reserves of 80 to 90 billion cubic meters of gas. The project includes the construction of a GTL plant, the development of 17 wet gas fields, seven oil reservoirs, exploration and development, and the exploitation of six mature oil fields.

This is a key project for Algeria, North Africa's top gas producer. It has an established distribution pipeline network into Europe. The project will be modeled on the $4 billion Gassi Touil integrated gas project, which was won by Spain's Repsol (NYSE:REP) (Madrid, Spain) in 2004.

GTL has a number of benefits for gas-rich countries. It provides a diversification away from supplying natural gas and LNG feedstock and produces a high added value product stream for a market absorbing high per-barrel pumped-oil prices.

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