Damietta LNG project forges ahead

12 July 2002

The liquefied natural gas (LNG) project being carried out by Spain's Union Fenosain Damietta has moved ahead, with the award of several new construction and equipment supply contracts in the past few weeks. The Spanish utility is also understood to have selected Goldman Sachsto advise it on seeking a strategic partner for its rapidly expanding gas business, which includes a project in Oman as well as in Egypt (see page 11).

The new contracts, including the construction of a jetty and the supply of gas turbine generators and pumps, have been placed by the engineering, procurement and construction (EPC) contractor, a joint venture of US-based Halliburton KBR, Japan's JGC Corporationand Spain's Tecnicas Reunidas. The estimated $1,000 million EPC contract was signed at the end of 2001 (MEED 4:1:02)

The $21 million contract for the LNG loading jetty was awarded to a joint venture of the local Orascom Construction Industries (OCI)and Belgium's Besix. Work will include dredging, shore and seabed protection, and building the jetty structure. Loading arms for the jetty are to be supplied by Germany's SVT. OCI is already working on the civil works element of the Eur 80 million ($78 million) storage tanks contract awarded to France's SN Technigazin September 2001 (MEED 28:9:01).

The contracts for the turbines and pumps have all gone to Japanese companies. The order for the five 30-MW turbines has gone to Japan's Hitachi, the cryogenic pumps contract has been let to Ebara Corporation, and the LNG pumps will be supplied by Nikkiso.

The project is being carried out by Spanish Egyptian Gas Company (Segas), a special purpose company set up by Union Fenosa with the local Egyptian Arab Trading Company. Segas officials say 14 per cent of the project has now been completed, ahead of the target of 10 per cent completion by this date. The first train is scheduled for completion towards the end of 2004. It will produce 5 million tonnes a year of LNG.

The one major element still to be resolved is the financing. Citibankwas appointed financial adviser in mid 2001, but banks have not yet been invited to participate in a project finance facility. Bankers say the scheme will be more attractive from a financing point of view if Union Fenosa manages to bring a strategic partner on board, preferably a major international oil company with experience of running LNG projects. An added bonus would be the involvement of an oil company with unallocated gas reserves in Egypt, bankers say. Union Fenosa has an agreement to buy gas from the government, but there are no specified reserves dedicated to the project.

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