The long-delayed Kitimat liquefied natural gas project in British Columbia got a boost in late April when LNG Canada selected Fluor Corp. and partner Yokohama-based JGC Corp. as the EPC contractor for the natural gas export-plant portion of the $40-billion development. Industry analysts expect Fluor’s portion of the award could be as much as $7 billion. LNG Canada would not confirm the oft-cited $14-billion price of the lump-sum contract.
The award is contingent on LNG Canada’s joint venture partners making a final investment decision, expected later this year, but selecting an EPC contractor is a significant milestone, says LNG Canada spokeswoman Susannah Pierce. LNG Canada delayed a final project decision in 2016 to find ways to reduce costs, she says. Joint venture participants include Shell, PetroChina, Korea Gas and Mitsubishi. Construction could begin late this year, with the plant coming on line in 2024.
LNG projects have had a hard time getting built on Canada’s west coast for reasons that include high costs compared with U.S. Gulf Coast projects. The British Columbia government in March implemented a new natural gas development framework that includes tax exemptions on construction costs and a repeal of the LNG income tax. Fluor’s team developed an innovative design and execution strategy that improves the project’s competitiveness and predictability, says Jim Brittain, group president of its energy and chemicals business.
Jamie Cook, lead construction sector analyst at Credit Suisse, says the action solidifies its view that “the energy cycle, and in particular LNG, is turning, and that Fluor will be a major beneficiary.” It beat a KBR-Technip-FMC joint venture also short-listed for Kitimat. Fluor was chosen based on its financial strength, technical design, execution plans and contract price and schedule, says Pierce. The contract includes two LNG processing trains, each with a capacity to produce 6.5 million annual tons, and an option to expand to four trains. Fluor and JGC will hire most of the 10,000 construction workers needed to complete the project.
