Contractors to LNG developers: Be more realistic about costs
- In the wake of delays and cost overruns on several U.S. liquefied natural gas projects, major construction industry players warned developers that they need to be more realistic about the costs they use in their planning processes, S&P Global Platts reported.
- Fluor CEO David Seaton said at Gastech Barcelona this week, according to Platts, that some developers go by unrealistic numbers on their spreadsheets instead of considering the realities of building LNG export terminals in the U.S. Contractors are still dealing with behind-schedule projects like a Freeport LNG facility in Texas, a Sempra Cameron LNG site in Louisiana and Kinder Morgan's Elba Liquefaction Project in Georgia, while the industry plans a stepped-up program of building to meet demand. However, Alasdair Cathcart, president of Bechtel, said the low-bid path is not the way to go and that collaboration and innovation are necessary to come up with "the best possible cost, the best possible schedule and the best possible certainty of outcome."
- Companies like McDermott International have backed away from potentially bad deals based on unrealistically low cost estimates but are also facing unfavorable, industry-wide conditions like a shrinking pool of qualified workers and U.S. immigration policies that keep foreign labor at home. Contractors can turn out these projects successfully given the right approach, however, as evidenced by a Cheniere Energy export terminal in Texas, which Bechtel should complete in time for the facility to go online earlier than anticipated.
Despite issuing warnings about using the right cost estimates to plan LNG projects, companies like Bechtel are not walking away from opportunities construction contracts for these projects present.
In June, Bechtel and others announced they had been tapped for billions of dollars of LNG contracts, including an up to $9 billion Sempra Energy LNG project in Port Arthur, Texas. The company will perform engineering, procurement, construction and commissioning services for the project, which includes liquefaction trains, pre-treatment facilities, storage capacity and marine berths.
But the natural gas industry has not spurred just the construction of production facilities and terminals. There are also large mid-Atlantic pipeline projects underway, although some have hit regulatory roadblocks. Both the $6 billion Atlantic Coast Pipeline and the $3.5 billion Mountain Valley Pipeline projects were halted due to permit issues, primarily concerning the environment and endangered species. Since then, the Federal Energy Regulatory Commission has allowed work to continue on both pipelines.
- S&P Global Platts Contractors express caution on bidding for new US LNG export projects
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