Kellogg poised for Union Fenosa LNG

14 December 2001

A joint venture between UK-based MW Kelloggand Spain's Tecnicas Reunidasis understood to have been selected for the estimated $1,000 million engineering, procurement and construction (EPC) contract for the liquefied natural gas (LNG) export project being carried out by Spanish utility Union Fenosain Damietta (MEED 5:10:01).

Kellogg - jointly owned by Halliburton KBRof the US and JGC Corporationof Japan - bid for the contract in competition with a joint venture of Chiyoda Corporationof Japan and Dragados & Construccionesof Spain. The contract is for the first train, scheduled to come on stream in 2004. Union Fenosa also has plans for a second train, set to start production in 2007. Each train will have the capacity to produce 4 million tonnes a year of LNG. Union Fenosa, one of the leading power generation companies in Spain, will be the principal buyer of the LNG exported from the Damietta plant.

Union Fenosa has already ordered most of the long-lead items for the LNG terminal, and has chartered two tankers to transport the gas to Spain.

It has formed Spanish Egyptian Gas Company (Segas)with local partner Egyptian Arab Trading Companyto carry out the Damietta scheme, and has agreed terms with the Egyptian General Petroleum Corporation (EGPC)for the purchase of the gas required for the plant. The propane pre-cooled mixed refrigerant cycle of Air Products & Chemicals (APCI)of the US will be used as the liquefaction process.

Once the EPC contract is formally signed, Union Fenosa is expected to move ahead with the final elements of the project's structure, so as to enable it to approach international banks for debt finance. Citibankis acting as financial adviser to the Spanish utility, and Foster Wheeler Corporationof the US is acting as owner's engineer on the project.

At least three other LNG projects are now under consideration. The most advanced is that of Egyptian LNG, set up by the UK's BG Group, Italy's Edison Internationaland EGPC . Bechtelof the US is now preparing front-end engineering and design (FEED) studies for the plant Egyptian LNG plans to build at Idku, east of Alexandria. This plant will process gas from offshore fields discovered by BG and Edison. It will use the optimised cascade liquefaction process developed by Phillips Petroleum Companyof the US. EPC bids are due to be invited in mid-2002 . Societe Generaleis the financial adviser for Egyptian LNG (MEED 5:10:01).

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