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Skikda LNG: KBR and Sonatrach sign a contract of $ 2.851 billion

Sonatrach and the U.S. company Kellogg Brown and Root have signed yesterday in Algiers contract to build the new rail giant Skikda 4.5 million tonnes. The contract has been an odyssey, as the discussions had been initiated in February 2006 with the first commercial offering of KBR, which was 3.560 billion.
The contract signed yesterday is about the amount of 2.851 billion dollars. This offer was made after Sonatrach and KBR had decided to stop negotiations following another commercial offering of KBR, which stood at 3.147 billion dollars in January 2007. The decision to halt talks was taken in the month of March 2007 after a final meeting. In April 2007, between 8 and 14, the two companies closed their discussions. It's on the sidelines of International Congress of the LNG held in Barcelona from April 24 to 27 that KBR renewed discussion with a new revised offer which was presented to Sonatrach. The dispute concerned the risk to the contractor for equipment prices and because the price agreed is generally not reviewable. The two companies resumed talks from June 14 They are closed July 4 and end with the agreement signed yesterday. Several rounds of discussions have taken place from February 2006 to April 2007. According Henni Mekki, director of the division of Sonatrach downstream development which has exhibited extensively in the film discussions, the price obtained for the Skikda LNG unit is located in the lower range of what is happening internationally. The cost analysis in the world indicates that the cost per tonne between 600 and 1000 dollars. The price obtained for Skikda is 634 dollars per tonne, he said. We must remember that the new train giant Skikda was designed to replace the units 20, 30 and 40 of complex GLK1 destroyed by the accident of January 19, 2004. The three units had a capacity of about 3 million tonnes. KBR, in consortium with the Japanese company JGC, had won the project at the end of 2005 following an invitation to tender that saw the selection of four companies and consortia.

A production of 32 million tons
KBR was selected for having already achieved a unit of LNG in the same magnitude as that of Skikda (4.5 million tons). Bechtel had been eliminated because she had requested funding of studies by Sonatrach in the project before making a commercial offer, according to the head of development division. Discussions on the commercial contract with KBR ultimately lasted 18 months. Meanwhile, KBR separated from Halliburton and became an independent company when she was a subsidiary of American giant. The separation took place in April 2007. A question raised by the press as to why Sonatrach has not launched another invitation to tender to the length of discussions, company officials indicated that there are four companies in the world that can achieve this kind of unity and given the huge number of projects in the world, the process could still take more time. In addition, equipment Important for which orders had been made could no longer be available because of strong demand in the world. We must wait six months or a year to place an order. And the other limiting factor is the increase in prices of equipment that has been multiplied by two and even three in some cases, according to Vice President downstream. Still, that officials of Sonatrach seemed satisfied with the conclusion of the contract that was signed by John Rose, vice president of KBR, and Abdelhafid Feghouli, vice president of Sonatrach downstream, in the presence of the Minister of Energy and Mines, Chakib Khelil, and CEO of Sonatrach and KBR, Mohamed Meziane and Bill Utt. The project is funded by equity and Sonatrach will be completed in 50 months on the industrial zone of Skikda. The project includes the construction of a plant with a production capacity of 4.5 million tonnes per annum of LNG, development of storage facilities integrated to the existing plant with a capacity of 150,000 m3 LNG , 66 000 m3 of butane, propane 66 000 m3 and a sphere of 3000 m3 of gasoline. The production capacity of finished products will be 4.5 million tonnes of LNG per year, td'éthane 164 000, 207 600 tonnes of propane, 171,400 tons of butane, 108,700 t of gasoline and 163.1 million tons of helium-enriched gas. The construction phase will create 4000-6000 jobs. In operation phase, the plant will employ 500 people. The work is scheduled to start in September 2007 and production in November 2011. For the CEO of Sonatrach, "this project, once completed, will provide a tool that Sonatrach will allow optimal use of our energy products, will consolidate the place of Algeria in the LNG industry and strengthen its role in energy supply European, Asian and American . LNG projects will focus in the coming years, Algeria's production of 20.6 million tonnes to 32 million tonnes in order to maintain its leading position in the global marketplace, "he added. For the Minister of Energy, "the project of Skikda is important for our gas strategy and the flexibility offered by LNG boost to our diversification strategy." KBR's CEO said for his part that "this new project will be one of the most powerful in the world and we are proud to do so with Sonatrach. ELWATAN