EGYPT: Early bird

16 September 2005
It has been a good summer for Roger Fox. In May, the chief executive officer (CEO) of Egyptian LNG (ELNG) saw the early start-up of train 1 at the company's liquefied natural gas (LNG) plant at Idku, three months ahead of schedule. Indeed, the project was so early when it came on stream that the offtake contract with Gaz de France (GdF), also one of the five project sponsors, had yet to come into force. But thanks to the buoyant conditions in the energy market, this was not a problem. The UK's BG Group, Malaysia's Petronas and Egyptian Natural Gas Holding Company (EGAS), all project sponsors too, were happy to take early shipments.

The positive news did not end there. ELNG's second train, originally due to come on stream next April, has advanced even faster and will see the first lifting of cargo in October. 'On train 2, we are so early that there will be several shipments to BG and Petronas prior to the formal offtake contract with BG,' says Fox.

Completing Idku

The speedy execution of ELNG, one of two major LNG complexes being built on Egypt's Mediterranean coast, has been a boost for the Egyptian economy. In the financial year to 30 June, real growth in the hydrocarbons sector reached 9.4 per cent, largely thanks to the LNG projects. The construction of the two ELNG trains alone has seen investment of $2,000 million flow into the country over the past three years. Once fully up and running, the two trains are expected to generate about $1,000 million worth of export income a year.

'In terms of Egypt getting dollars in, it is a hugely significant contributor and driver to the economy,' says Fox. 'The fact that the government is now seeing revenues for Egypt as a whole means these are big projects for the country. And it would explain why we had so much co-operation all the way through this project.'

From the outset, the local authorities granted ELNG's Idku site free zone status to support the project, both from an administrative and logistical point of view. Fox says smooth co-operation with the various ministries and authorities involved has been a key reason for the project's fast progress.

'It was a big task to set up the free zone, to have the customs people on site, to have the right paperwork in place for us to import the goods directly into Egypt and straight on to the beach and to the plant,' says Fox. 'Procuring such huge amounts of equipment into any country would be quite difficult. On the upstream side we spent something like $1,500 million and on the LNG side something around $2,000 million, so there was a lot of money being poured into the Idku facility. To import this equipment it has taken a lot of logistics and help from the Egyptian authorities, who have been enormously supportive.'

Single-sourcing

There have been other reasons why ELNG beat its deadlines. Fox says the project is essentially an improved replica of the Atlantic LNG project in Trinidad & Tobago, in which BG is a main shareholder. So designs and footprints already existed. Moreover, Atlantic's engineering, procurement and construction (EPC) contractor, Bechtel of the US, was single-sourced for the ELNG job, allowing for considerable timesaving by cutting out lengthy tender procedures and enabling a lot of the early work to be based on existing designs.

'If you look at the speed between finding the gas, signing the heads of agreement [HoA] and the EPC [contract] and the first shipments, that certainly is best in class at the moment,' says Fox (see table 1).

'We all can do really quick contracts. But the really clever thing was the government deciding as quickly as it did that it was willing to export this gas. That puts the project apart from everywhere else. The government had a clear vision of how much gas it wants for domestic use, how much it wants to export and how much it wants for reserves. And q

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications