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EPC contract awarded for two major LNG projects

Posted: 21 December 2005

Qatar Petroleum, ConocoPhillips, and Royal Dutch Shell plc (Shell) reported the award of the onshore Engineering, Procurement and Construction (EPC) contract for two large-scale Liquefied Natural Gas (LNG) trains for the Qatargas 3 and Qatargas 4 LNG projects to the Chiyoda Corporation and Technip France Joint Venture (CTJV).

The Qatargas 3 and Qatargas 4 projects will be located at Ras Laffan Industrial City . This event represents the formal launch of these two major LNG projects which will constitute significant additional sources of natural gas for key markets around the world.

Qatargas Operating Company will have responsibility for operations of the upstream, and midstream once constructed.

The successful EPC contract award of the large and complex Qatargas 3 and Qatargas 4 projects is made possible through the combined strengths of three world-class companies - Qatar Petroleum, ConocoPhillips and Royal Dutch Shell plc.

The EPC contract with CTJV covers the engineering, procurement, and construction of onshore facilities for two large-scale LNG trains, each with a nameplate capacity of 7.8 million tonnes-per-annum.

The total price of this contract is valued around US$ 4 billion.

Qatargas 3 is an integrated project, jointly owned by Qatar Petroleum (68.5 per cent), ConocoPhillips (30 per cent) and Mitsui (1.5 per cent).

The project comprises upstream gas production facilities to produce approximately 1.4 billion cubic feet per day of natural gas, including an average of 70,000 bbl/d of Liquefied Petroleum Gas (LPG) and condensate combined from Qatar ’s North Field over the 25- year life of the project.

The project also includes a 7.8 million tonnes-per-annum LNG train. The LNG will be shipped from Qatar in a fleet of state-of-the-art large LNG carriers, and is destined for sale primarily in the United States.

First LNG cargos are expected to be delivered from Qatargas 3 in 2009.

Qatargas 4 will likewise be an integrated project comprising upstream gas production facilities to produce approximately 1.4 billion cubic feet per day of natural gas, including an average of approximately 70,000 bbl/d of LPG and condensate combined from Qatar 's North Field over the 25 year life of the project. The integrated project also includes a 7.8 million tonnes-per-annum liquefaction plant and the required LNG shipping capability. The project will be implemented through a joint venture between QP (70 per cent) and Shell (30 per cent). The majority of the LNG will be sold into the growing markets of North America . First LNG cargos are scheduled for delivery around the end of the decade.

For Qatargas 3, the EPC contract marks the Final Investment Decision for the project, with all definitive agreements signed and financing completed. In addition to the EPC contract award, Qatargas 3 also signed a Development and Fiscal Agreement, a Sales and Purchase Agreement and the necessary financing agreements.

Qatargas 3 has received commitments for over $2.8 billion from 26 commercial banks, the Export Import Bank of the United States (U.S. Exim) and Japan Bank for International Cooperation (JBIC). Commercial agreements and financing for Qatargas 4 will continue to advance over the coming months.

The award of the EPC contract also marks the Final Investment Decision for Qatargas 4, with the finalisation of related definitive agreements and financing expected during 2006.

In order to capture substantial synergies, Qatargas 3 and Qatargas 4 are executing the development of the onshore and offshore assets to enable them to be operated as a single integrated project. This includes the joint development of offshore facilities situated in a common offshore block in the North Field, producing approximately 2.8 billion cubic feet per day of natural gas and a substantial quantity of associated LPG and condensate, the construction of two identical LNG process trains, and associated gas treating facilities for both the Qatargas 3 and Qatargas 4 Joint Ventures.

Speaking at the signing of the EPC contract, His Excellency Abdullah bin Hamad Al-Attiyah, second Deputy Premier and Minister of Energy and Industry of Qatar said, “Today’s event marks the launch of the large scale Qatargas 3 and Qatargas 4 LNG projects which is a significant step for Qatar on its road to become the world’s leading producer of LNG with 77 million tons per annum by 2010. It is also a clear illustration of what strong and successful partnerships are capable of achieving. I commend the Qatargas 3 and Qatargas 4 projects on reaching this key milestone, and am confident in the continued success of these world-class LNG projects.”

Faisal Al Suwaidi, Chairman of Qatargas Operating Company and the CEO of Qatargas, added “with the signing today, Qatargas has made another significant step in achieving its vision of being the world’s leading supplier of LNG. We can now say that we supply every major LNG consuming region in the world having started with the Japanese market, moving to Europe and now to the American market. Our projects will help fuel the world with clean energy”

“We are extremely proud of our partnership with Qatar Petroleum. The Qatargas 3 project is a major achievement that will help us meet the growing demand for energy by providing our customers with a significant source of natural gas,” said ConocoPhillips Chairman and Central Executive Officer, Jim Mulva. “We believe our project management expertise and the sound underlying commercial arrangements make this a very strong project.”

Adding his comments, Jeroen van der Veer, Chief Executive Royal Dutch Shell plc, said “We are very proud of our strong relationship with the State of Qatar and are pleased to contribute to realizing the country’s ambition to be the world leader in LNG production. The Qatargas 4 venture is consistent with Shell’s strategy of long term, upstream growth through large-scale, integrated natural gas developments. With LNG demand set to more than double in the coming years, it positions Shell and our partners well to benefit from a strong business environment and to help meet the growing energy needs of key natural gas markets around the world.”

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