Fast track for third LNG train

12 July 2002

The proposed third-train expansion of the liquefied natural gas (LNG) plant at Qalhat near Sur is to move ahead on a fast track following the commitment made to the project in late May by Spain's Union Fenosa. A steering committee has been formed by the government of Oman and the Spanish utility to drive the project forward (MEED 7:6:02).

In an interview with MEED on 9 July, Juan Varela, deputy general manager of Union Fenosa Gas, said that a decision would be made by October on the main engineering, procurement and construction (EPC) package for the estimated $650 million-700 million scheme.

The team of Japan's Chiyoda Corporationand the US' Foster Wheeler Corporationwhich carried out the EPC for the first two trains now looks set for the third-train project. 'We are talking with the previous contracting team,' Varela said. 'Negotiating a contract with them is the fastest option. It is not yet fully decided but we are 90 per cent sure. We want work to start in the first quarter of 2003 and first gas in 2006.'

Foster Wheeler has already worked on front-end engineering and design (FEED) studies for the expansion. The proposed train will have the capacity to produce 3.2 million tonnes a year (t/y) of LNG. Union Fenosa has made a commitment to take 50 per cent of this gas for its domestic market in Spain. 'It is important for our long-term strategy that we secure the supply of more gas in addition to the LNG that we will be receiving from Egypt in 2004. We have good marketing conditions in Spain at present and have secured a very competitive price for the gas from Oman. It is not a fixed price but we have assurances that it will remain constant,' says Varela.

The nature of the financing arrangements for the expansion is also starting to emerge. Citibank, which worked on the initial finance and refinance packages for Oman LNG, expects to be awarded the financial advisory for the third train. 'Yes we have been selected but not yet formally appointed,' says a spokesperson for Citibank.

Bankers say that a third foreign partner will first have to be found to invest in the third train before the deal can be considered bankable, however. 'In terms of financing, the project is a very different animal from Oman LNG. They still need to pull in another major international offtaker for it to work,' says an international banker looking at the deal.

Union Fenosa, which is the third biggest energy provider in Spain, plans to use the Omani gas to leverage more market share in the domestic market. The company is already building an LNG plant in Egypt and is understood to be looking for a joint venture partner for its international gas business (see page 12). 'We don't discount the possibility of investing in another LNG project in the Gulf, either in Qatar, Abu Dhabi or Yemen,' said Varela.

A MEED Subscription...

Subscribe or upgrade your current 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