As many observers expected, a joint venture of Fluor Corp. and Japan's JGC Corp. will proceed to the next stage of building what is seen as North America's largest liquefied-natural-gas project.
The firms announced, on Jan. 13, a contract on the estimated $15-billion Kitimat LNG project in British Columbia that includes front-end design completion and next-stage engineering, procurement and construction.
Fluor did not disclose the contract value or timing. But E&C sector analyst Jamie Cook of Credit Suisse estimates the cost-plus award at about $10 billion, split between the firms.
The EPC contract would come after owners Chevron and Apache Corp. make a final investment decision, expected later this year, says analyst Michael Dudas of Sterne Agee.
Kitimat could become Canada's first major LNG production and export terminal, said Peter Oosterveer, a Fluor group president. It has an export license and key environmental permits and would handle 12 million tons of LNG annually.
Analysts predict construction to start this year and finish by 2018.
The JV beat a KBR-led team, which also holds a Kitimat front-end design contract. KBR and Fluor are vying for another British Columbia LNG project and one in Louisiana, set for award late in 2014 or early 2015, says Cook. Fluor and JGC also won a $5-billion ethane cracker project in Baytown, Texas, last fall.
Dudas predicts a third of $200 billion in announced North American LNG projects "could move forward, supporting a mega-cycle through 2018."
Meanwhile, contractor CB&I announced, on Jan. 13, a pact with Japan's Chiyoda to design and build LNG projects in North America, but labor supply and cost remain key issues.
Chevron has said it would use temporary foreign workers to help build Kitimat, which may require 4,000 skilled trades. But a December Bloomberg report says labor shortages in Canada already have hiked wages, up to 60% above those in U.S., for some oil and gas workers.
