LEIGHTON Holdings subsidiaries Leighton Contractors and John Holland are two of Australia’s major construction contractors, but they are not names normally associated with engineering work on LNG projects.
LEIGHTON Holdings subsidiaries Leighton Contractors and John Holland are two of Australia’s major construction contractors, but they are not names normally associated with engineering work on LNG projects.
Their involvement in the LNG sector has stepped up a notch after they teamed up with international engineering group KBR to form the KLH Australia joint venture.
KLH was awarded its first contract earlier this year, for a front-end engineering and design (FEED) study of the proposed Browse LNG project.
The joint venture has powerful credentials, with KBR being an acknowledged world leader in LNG engineering.
It played a key role in the development of the North West Shelf project, currently has a lead role in the Gorgon project, is working on the Ichthys project, and is bidding to handle the expansion of the Pluto LNG project (see table).
Leighton Contractors and John Holland will bring their experience, including on the Gorgon project, in areas like infrastructure, accommodation and marine facilities.
Leighton Holland joint venture chairman Phil Cooper said the Browse contract signified a strategic shift for Leighton Contractors and John Holland.
“The KLH Australia JV brings together complementary competencies rather than traditional peers, which is often the norm in the LNG sector,” he said.
KLH is one of more than half a dozen engineering groups to have won FEED contracts for the Browse project.
The appointment of so many engineers says something about the size and complexity of LNG projects.
This doesn’t come cheap. The Browse joint venture, led by Woodside, plans to spend $780 million this year on the project.
The provision of engineering services can also be highly competitive, with a growing number of international groups targeting the Australian market.
The KLH joint venture, for instance, is competing with a consortium comprising Japanese company Chiyoda, US-based CB&I and Italy’s Saipem, all of which have extensive oil and gas experience.
It is anticipated that one of these groups will be awarded the lucrative contract to manage the design and construction of the planned LNG plant at James Price Point.
Based on recent industry experience, that contract alone will be worth more than $3 billion.
Fluor, for instance, was awarded a $US3.5 billion engineering contract in January for the Gladstone LNG project in Queensland.
That trumped the $2.7 billion engineering contract awarded to the KBR-led Kellogg joint venture for the Gorgon project.
Overseas work
LNG projects are underpinning keen demand for engineers in Perth, though in practice much of the work is being undertaken overseas.
Japanese company MODEC, for instance, said the work for its Browse study would be undertaken in Houston.
Fluor said its Browse contract, which would employ 150 experts, would be spit between its Perth, Houston and Manila offices.
Norway’s Aker Solutions will split its Browse work between Oslo and Perth.
Aker Solutions Oil and Gas Australia vice-president Jeanette Roberts said the Oslo team brought experience of delivering 50 floating platforms, while its Perth team would focus on local issues such as health and safety, environment and technical risk, and Australian industry participation.
Ms Roberts said Aker’s proposal would use technology that had not previously been used in Australia.
“While the technology is new here, it is common in the Gulf of Mexico and the North Sea,” she said.
“This is an opportunity for Aker Solutions to build its capability in Australia and for the Perth team to be instrumental in bringing TLP technology to Australia.
“The Perth team includes Norwegian experts as well as WA locals who will benefit greatly from this experience on what is a world-class project.”
Scottish company Wood Group is yet another engineering firm working on Browse.
It announced last month that its subsidiary, JP Kenny, would perform subsea and pipelines FEED studies, with the work being undertaken at its Browse project office in Perth.
Another Wood Group subsidiary, MCS Kenny, will support Aker Solutions’ work on the ‘risers’.
The strategy of awarding competing FEED contracts has not been restricted to the Browse project.
In 2009, Woodside employed a similar approach at its planned Pluto expansion project.
In this case, it awarded dual contracts to KBR and a FosterWheeler WorleyParsons joint venture. Both groups have history with Woodside.
The KBR-led Kellogg joint venture managed the design and construction of the first four production trains at the North West Shelf venture, while FWWP managed the fifth train and the Pluto foundation project.
The cost blowouts and completion delays that have marred Pluto will not help FWWP win more work at Woodside projects.
Woodside said it chose to award dual FEED contracts to provide the necessary due diligence for the engineering, procurement and construction management phase in the fastest time frame.
Spreading the load
Chevron adopted a more traditional approach for its Wheatstone project, with FEED contracts awarded to Bechtel, Technip Oceania and Intecsea for different aspects of the project (see table).
Technip said its work was spread between its Perth, Kuala Lumpur, Houston and Paris offices.
Wood Group has also won work on Wheatstone, through its operations and maintenance subsidiary OMD, which has been contracted to provide advice on project execution planning.
In addition, JP Kenny is, indirectly, working on Wheatstone. It has been contracted by Apache Energy to carry out of the FEED study on the Julimar development, which will be one of the gas suppliers to Wheatstone.
The Julimar development consists of three gas fields and up to 18 subsea wells tied back to the Wheatstone central processing platform.
When the FEED contract was awarded last year, JP Kenny said it would require more than 25,000 man-hours of input. It said Julimar was its fifth successive multi-billion dollar subsea and pipeline project off the north-west coast; its other projects have included Ichthys and Pluto.
Paris-based Technip is another engineering firm to have racked up a string of contract wins in the region.
Technip and Samsung have worked extensively on Shell’s proposed floating LNG plant.
They are believed to have employed more than 600 people on the project, with about half in Paris and the balance across Houston, London, Perth, Kuala Lumpur and Korea.
Technip has also worked on Italian company Eni’s Kitan oil field development in the Timor Sea; this work was undertaken in Perth.
WA’s largest home-grown engineering firm, Clough, has won multiple contracts on two LNG projects, Gorgon and PNG, primarily through joint ventures.
In a profit downgrade released on Friday, Clough illustrated some of the challenges of turning contracts into anticipated profits. It said weather disruptions on Barrow Island had caused delays on the Gorgon project, while lack of site access in PNG had reduced activity there.