EWC appoints Sengkang LNG project contractors
Thursday, August 28 2008 - 02:55 AM WIB
Sengkang LNG Project, onshore South Sulawesi
Of the proved reserves in our Sengkang Contract Area, approximately 343.3 BCF will be required to meet demand from Pertamina under the Gas Supply Agreement and any requisite extension thereto if the Sengkang Power Plant is upgraded to 315 MW as referred to above. In addition, we have calculated that more than 2 TCF of prospective gas resources may be available in prospects which have been identified in the Sengkang Contract Area. In order to exploit these gas reserves and prospective resources, we are constructing an LNG facility and export infrastructure referred to in this prospectus as the ?Sengkang LNG Facility?, using our modular LNG train, on the South Sulawesi coastline, in the same region as our Sengkang Contract Area and Sengkang Power Plant.
The Sengkang LNG Facility will have a production capacity of 2 MTPA and combine four modular LNG trains, each with a production capacity of 0.5 MTPA. Production of LNG from the first modular LNG train is planned for the last quarter of 2009. The remaining three modular LNG trains are planned to commence operation in first quarter, third quarter and fourth quarter of 2010 respectively, providing a total LNG capacity for the Sengkang LNG Facility of 2 MTPA.
We already have proved reserves sufficient to produce 1 million tons per annum of LNG for more than 5 years. By utilising existing gas reserves for this LNG production we plan to be able to use internally generated cash flow to finance the foreseen further gas field development in the Sengkang Contract Area. If development of gas resources justify (which cannot be known at the present time), we envisage expanding the capacity of the Sengkang LNG Facility up to 5 MTPA through a phased development of additional 0.5 MTPA modular LNG trains.
Our business strategy is to expedite the construction of the Sengkang LNG Facility without first having completed substantial resource development in the Sengkang Contract Area or concluding long term off-take agreements with customers for our LNG. This non-traditional approach to LNG development rests on the relatively lower cost of our Sengkang LNG Facility, which will utilise our modular LNG train, compared to conventional large-scale LNG trains and our ability to finance this key project from cash flow generated from our operating business.
? Contract and Supply status for the Sengkang LNG Project
The contractual structure for the Sengkang LNG Project is in place and the major components of the Sengkang LNG Facility, to enable production of 2 MTPA of LNG were ordered during 2007 and are now under fabrication in the USA, Canada and Germany.
? Engineering, Procurement and Construction (EPC)
Slipform (H.K.) is the proposed EPC contractor, with responsibility for the engineering, procurement and construction of the Sengkang LNG Facility on a fixed price, turn-key basis. This will involve co-ordination of all major and material equipment suppliers, arranging freight and delivery of major equipment to the site, providing any balance of plant items not being provided by subcontractors and completion of all civil and construction works. An EPC Contract will be entered into between Sulawesi LNG Slipform (H.K.), CEA and Kerbridge Energy Pty Ltd based on FIDIC Conditions of Contract for EPC Turnkey Projects as amended to reflect the arrangements between the parties. The contract value of the EPC Contract is US$350 million. CEA and Kerbridge Energy Pty Ltd are party to the EPC Contract as providers of LNG advisory services to Slipform (H.K.).
? Civil Design and Construction
Ove Arup & Partners International Ltd (?Ove Arup?) is responsible for designing the storage, loading, maritime and civil engineering for the Sengkang LNG Project. A design services agreement was entered into between Ove Arup and us on 24 July 2007. This will be novated to Slipform (H.K.) by a deed of novation between us, Ove Arup and Slipforrn (H.K.).
? LNG Facility and Final Gas Clean Up
Chart Energy & Chemicals Inc (?Chart?) is responsible for the supply and installation of four 0.5 MTPA modular LNG trains, including gas pre-treatment plant. We placed a contract for the supply and installation of this equipment with Chart on 4 August 2007. This will be novated to Slipform (H.K.) by a deed of novation between us, Chart and Slipform (H.K.).
- Chart has placed a subcontract with Siemens for four 27 MW electric-motor-driven main refrigerant compressors and one Siemens Aktiengesellschaft (?Siemens?) Robicon frequency convertor for electric-motor startup.
- Chart has placed a subcontract with TDE for the gas pre-treatment system.
- Chart will manufacture the LNG liquefier, which includes the cold box, air coolers, vessels and the liquid collection and vaporisation system.
? LNG Marine Loading-Arms
A contract has been placed with Aker Kvearner Woodfield Systems Limited for the supply of LNG marine loading-arms on 12 December 2007. This will be novated to Slipform (H.K.).
? Balance of Plant
Siemens Pte Ltd is responsible for the provision of certain balance of plant equipment, including high/medium/low voltage switchgear, fire fighting systems, distribution and control systems and electrical systems under a contract to be entered into with Slipform (H.K.).
? Operation & Maintenance
An O&M Contract will be entered into between Sulawesi LNG Slipform (H.K.), CEA and Kerbridge Energy Pty Ltd. Slipform (H.K.) is the provider of operation and maintenance services under the O&M Contract. CEA and Kerbridge Energy Pty Ltd are party to the EPC Contract as providers of LNG advisory services to Slipform (H.K.)
Strategic Alliances
We have formed strategic alliances with the principal equipment suppliers to the Sengkang LNG Project, Chart and Siemens. Collaboration with these industry leaders over several years on our concept for a modular LNG train led to the realisation of our configuration for our modular LNG train. This will use standardised 0.5 MTPA LNG liquefaction units made up of proven ?off the shelf? technology. We entered into strategic alliance agreements with Chart on 4 August 2007 and with Siemens on 19 September 2007 respectively to develop further mid-scale modular LNG projects using our modular LNG train.
Total capital expenditure on the Sengkang LNG Project, to enable production of 2 MTPA of LNG is expected to be US$350 million which is expected to be financed from a combination of non-recourse project finance and the proceeds of our placement of Shares in May 2008. We have mandated Standard Chartered Bank and Mizuho Bank as advisors for the financing of the Sengkang LNG Project. On 25 July 2008, we entered into a loan facility with Mizuho Bank and Standard Chartered Bank for a US$60 million loan facility and letter of credit to fmance capital expenditure for or in connection with the Sengkang LNG Project and related projects entered into by EEES and PIES, including but not limited to making payments to Chart
The Ministry of Energy and Mineral Resources of Indonesia issued us with guidelines to obtain an operating licence for the Sengkang LNG Facility in November 2006. We are required, among other things, to satisfy certain conditions and obtain various other licences, permits and approvals as the Sengkang LNG Project proceeds and before an operating licence is issued. We are in the process of complying with these guidelines and these matters are proceeding satisfactorily. We are finalizing arrangements to acquire the land required for the Sengkang LNG Project
The Sengkang LNG Project requires agreements to be concluded with EEES and BPMigas for Mare gas supply and also the completion of a programme of gas infrastructure works, including an expansion of the Sengkang Gas Plant This programme is scheduled to be completed by the third quarter of 2009. We are carrying out a seismic programme and other resource development work in the Sengkang Contract Area.
The electric power required for the Sengkang LNG Facility is expected to be generated by our Sengkang Power Plant by way of the proposed 120MW expansion. We are in negotiations with PLN regarding this supply of electricity from the South Sulawesi electricity grid to the Sengkang LNG Facility which will require the construction of a 40 km transmission line connecting PLN?s Sengkang Switchyard at the Sengkang Power Plant with the Sengkang LNG Facility.
LNG Customers
We are currently in discussions regarding LNG sales with parties in China, Japan, Indonesia and the Philippines. On 30 May 2008, we entered into a MOU with Indonesia Power, a subsidiary of PLN, to negotiate the supply of LNG initially to three of their power stations in Java and Bali. Under this MOU it is proposed that the supply of LNG will be under a 10 year agreement, initially providing for the supply of up to 1.5 MTPA of LNG if an agreement is concluded with Indonesia Power, we would develop LNG receiving and re-gasification facilities at these power plants to receive LNG from our Sengkang LNG Facility under the MOU. Indonesia Power is also seeking our supply of up to 5 MTPA of LNG in a subsequent phase to replace fuel oil in its other power stations.
We understand that Indonesia Power is looking to use cleaner and more efficient natural gas to replace diesel fuel oil in its power generation facilities. (end of edited excerpt)