LNG Canada Sets EPC Selection
LNG Canada has selected a joint venture of Japan’s JGC Corporation and Fluor as the engineering, procurement and construction (EPC) contractor for its $40bn, 13mn metric tons/year (mt/yr) export terminal in Kitimat, BC, it said April 27.
The decision halts a downward trend as several other projects have cancelled projects to liquefy and export gas from western Canada.
While LNG Canada did not announce the EPC value due to commercial considerations, JGC earlier this month revealed in published reports in Japan that the contract was valued at $14bn.
The contract award is conditional on LNG Canada’s joint venture participants – Shell, PetroChina, Kogas and Mitsubishi – taking a positive final investment decision (FID) later this year and is one component of the overall capital cost of the project.
“Selecting an EPC contractor is a significant milestone for the LNG Canada project,” Susannah Pierce, LNG Canada’s director of external relations told NGW in an e-mailed statement. “LNG Canada is working toward submitting a competitive decision-ready project to its joint venture participants in 2018.”
The JGC/Fluor joint venture has significant experience in Canada and extensive LNG and mega-project experience. Fluor has nearly 70 years of Canadian project experience with over 7,500 construction personnel working on Canadian projects in 2017, while JGC has constructed more than 48 LNG trains globally.
“We thank LNG Canada for the opportunity to participate in developing the first world-class LNG facility in BC,” Jim Brittain, group president of Fluor’s Energy & Chemical Business, said in a statement. “Our team has developed an innovative design and execution strategy that improves the project’s competitiveness and predictability and positions it for a final investment decision.”
As EPC contractor, the JGC/Fluor joint venture will be directly responsible for hiring the majority of the thousands of skilled workers that will be required during LNG Canada’s five-year construction period and will adhere to LNG Canada’s commitment to ensure the project hires locally and within BC before reaching out to the rest of Canada.
LNG Canada’s commitment to some positions being made available to apprentices will also be executed by JGC/Fluor.
Martin King, director of institutional research at GMP FirstEnergy, told NGW the $14bn EPC figure, if accurate, and a full nameplate capacity of 7.8mn mt/yr for each of the project's initial two trains (expansion to four trains is possible) would translate into an EPC cost of about $900/mt – “very reasonable for a greenfield LNG construction project.”
“But we still have not heard any hard information on whether LNG Canada has been granted an exemption from the countervailing duty on imported modularised steel components, which would be critical for the construction,” he added.
Last October, Canada imposed a 45.8% anti-dumping duty on industrial steel components imported from China, South Korea and Spain. Earlier requests from LNG Canada and other LNG promoters and developers for an exemption were denied by the Canadian International Trade Tribunal (CITT), prompting an appeal to the Federal Court of Appeal.
LNG Canada filed a judicial review in April, Pierce said, at which it argued that the CITT's decision should be set aside by the court and sent back to the CITT to confirm LNG Canada's original assertion that the large, complex modules needed for the project can't be built in Canada and, therefore, the importation of the modules can't harm the domestic steel industry. As a result, the anti-dumping duty should not apply.