BG Moving Ahead with Egyptian LNG Train 2

BG Group and its partners announced that the start of the Engineering, Procurement and Construction (EPC) early works program for the proposed second train of the Egyptian LNG (ELNG) project has been authorized. Train 2 is expected to cost approximately US $550 million.

The early works program, consisting of detailed engineering, procurement of long lead-time items and site preparation work, is expected to be completed early in the third quarter of 2003, converting into the Train 2 EPC contract thereafter. Bechtel Inc., of the USA, which is undertaking the US$900 million EPC of Train 1, will carry out the early works using their design and construction subcontractors including Egyptian General Petroleum Corporation (EGPC) affiliates, Petrojet and Enppi.

The US $1.35 billion first train is designed to produce 3.6 million tons per annum (mtpa) of liquefied natural gas (LNG). The second train envisages output doubling in size at the plant, located at Idku, approximately 50 kilometers east of Alexandria. Both trains will be built using the Phillips liquefaction technology and will share storage and marine facilities.

Martin Houston, Executive Vice President, BG Group plc, said: "Taking this key step in the realization of Train Two allows BG Group and its partners to build on the rapid progress of the first train of Egyptian LNG. The project maintains its fast-track schedule with the first shipment of LNG from Train One on target for the third quarter of 2005 and Train Two's early works program underpinning first production for around mid-2006. This aggressive timetable maximizes the project's value to Egypt and to the partners."

Marketing of Train 2 output has reached an advanced stage. It is expected that negotiations will conclude during the first part of the early works program and fully termed agreements will be signed after this. European and USA buyers have expressed strong interest in purchasing Train 2 output.

The partners in ELNG Train 2 are: BG Group (38 percent), Edison International (38 percent), EGPC (12 percent) and the Egyptian Natural Gas Holding Company (EGAS, 12 percent). BG Group, Edison International and EGPC are also the gas sellers. The gas for Train 2 is planned to come from fields in the BG-operated West Delta Deep Marine (WDDM) Concession, offshore the Nile Delta.

The ELNG plant will be a tolling facility and will provide a liquefaction service to BG Group and its partners in the WDDM Concession. Construction of Train 1 is under way and the entire output has been sold to Gaz de France under a 20-year agreement.

The equity in Train 1 is held by BG Group (35.5 percent), Edison International (35.5 percent), EGAS (12 percent), EGPC (12 percent ) and Gaz de France (5 percent). An innovative commercial structure allows third parties to invest in future LNG production trains at the site, which can accommodate up to five trains.