CB&I Wins EPC Contract for Sakhalin II LNG Storage

CB&I's subsidiary, CB&I Europe B.V. and CMP Holdings B.V., have been awarded lump-sum contracts in excess of US $95 million for liquefied natural gas (LNG) storage tanks at a natural gas liquefaction plant planned at Prigorodnoye on Aniva Bay, Sakhalin Island, in the far eastern portion of the Russian Federation. The two LNG tanks that CB&I will supply for the project will be the first LNG tanks designed and constructed in Russia.

CB&I was selected for the construction of two LNG tanks by Chiyotec Limited and CTSD Limited, who were awarded contracts together with their Russian partners, NIPIgasperabotka and Khimenergo Consortium, for the implementation of the overall LNG project by the owner, Sakhalin Energy Investment Company Ltd. (SEIC), whose shareholders are Shell Sakhalin Holdings BV (Royal Dutch/Shell Group of Companies), Mitsui Sakhalin Holdings BV (Mitsui & Co., Ltd.) and Diamond Gas Sakhalin BV (Mitsubishi Corporation).

The Sakhalin II Project represents the largest single foreign direct investment project in Russia to date, with a total investment estimated at US$10 billion. The Sakhalin LNG production facility will consist of two trains, each with an annual liquefaction capacity of 4.8 million tons, making it the largest in the world. Shell's Dual Mixed Refrigerant liquefaction process will be adopted for this project, marking its first use in a baseload LNG plant. First LNG is expected to be delivered from the terminal in 2007.

CB&I's work scope includes the engineering, procurement and construction of two 100,000 cubic meter full containment LNG storage tanks, two 1,630 cubic meter LNG Hortonsphere ® pressure vessels, and a concrete batching plant to supply concrete for the foundations and containment. CB&I will self perform all civil works for its work scope.

SEIC's policy for Russian content will be incorporated and managed by CB&I to utilize local materials and labor to the greatest extent possible, while maintaining high standards of safety, quality, and schedule. CB&I's policy of direct hire, full sole source EPC responsibility for the entire scope of work provides the client with the best combination of local content and industry expertise. As there are no existing Russian codes that address LNG Storage, CB&I will engage Russian Design Institutes to ensure local compliance issues are met and to harmonize International and Client standards within the Russian system.

The island's remote location in the Sea of Okhotsk north of Japan, the harsh climate and the region's seismic activity combine to make this project challenging for the owner and contractors alike. CB&I is scheduled to complete its tanks in spring 2007.

"We are proud to have been selected for this groundbreaking LNG development," said Gerald M. Glenn, CB&I's Chairman, President and CEO. "We believe our previous experience in the design and construction of the marine terminal crude oil tankage at Novorossiysk was instrumental in providing the prime contractors with the confidence that CB&I possesses the technical and logistic capabilities to execute this demanding project."


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