Union Fenosa signs EPC contract for Damietta LNG

04 January 2002

The project to build Egypt's first liquefied natural gas (LNG) export terminal, in Damietta, took a decisive step forward on 19 December with the signing in Madrid of the engineering, procurement and construction (EPC) contract. The developer, Spanish utility Union Fenosa, has awarded the contract for the estimated $1,000 million first train to a joint venture of Halliburton KBRof the US, JGC Corporationof Japan and Tecnicas Reunidasof Spain. The joint venture has also been given an option on the planned second train (MEED 21:12:01).

The first train is scheduled for completion in September 2004, and will have a capacity to produce 5 million tonnes a year (t/y) of LNG. The second train is planned to come on stream three years later. Union Fenosa says that about 20 per cent of the work on the project will be done by local firms. Engineering for the Petroleum & Process Industries (Enppi)will be providing engineering services, and Petrojet will do civil works and erection as part of the EPC contract. The project is expected to create 6,000 jobs directly connected with the plant's construction, and 270 jobs in the first phase of operations.

The LNG will be transported on two ships, already secured on long-term time charters by Union Fenosa, to regassification terminals under construction in Valencia and Galicia. The gas will be sold to power generators in Spain.

The first concrete step in the project was taken in July 2000, when Union Fenosa signed an agreement with the Egyptian General Petroleum Corporation (EGPC)to purchase up to 8,000 million cubic metres a year (roughly equivalent to 800 million cubic feet a day) of natural gas from the national grid. The agreement is valid for 25 years, extendible for a further 25 years. The Spanish company took on board Foster Wheeler Corporation of the US as owner's engineer.

The Halliburton KBR/JGC team has been working on the Damietta project since late 2000, when it and Japan's Chiyoda Corporationwere asked to prepare parallel front-end engineering and design (FEED) studies. The two teams were then invited to submit bids for the EPC contract in mid 2001.

Contracts for the main long-lead items were placed during 2001. These included gas turbines from GE Power Systemsof the US and storage tanks from France's SN Technigaz. The liquefaction process to be used will be the propane pre-cooled mixed refrigerant cycle of Air Products & Chemicals (APCI)of the US.

The details of how the project is to be financed have yet to be announced. Union Fenosa has set up a special purpose operating company in Egypt - Spanish Egyptian Gas Company (Segas)- and has appointed Citibankas its adviser for a project finance facility.

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