ROD DEAN'S 2006 REVIEW

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E & C Hydrocarbon Review - The Global view from Europe. Looking back on 2006 & ahead to 2007.

Two of the newest and biggest LNG projects have been over-budget and late.

Sakhalin-2 LNG in Russia has doubled in cost to more than $US20bn. Snohvit LNG will cost $US9.5bn, almost 50 per cent more than first anticipated in 2002. Building LNG plants now takes four years, rather than three, because contractors are stretched, said Mr Flower, the consultant.

"Construction and permitting of LNG plants is a lengthy process," BP spokesman David Nicholas said from London.

Chevron, last year abandoned its timetable for approving the Gorgon LNG project in Australia. Developing the fields, which hold $US400bn of natural gas, would cost $US10bn and increase world supplies by 7 per cent. The driller and partners Shell and Exxon Mobil are studying ways to reduce construction costs. The project is "large, complex and faces considerable cost challenges", Colin Beckett, Gorgon area manager for Chevron said in an interview last month.

Politics and violence also hold back LNG developments. In the seas between Australia and East Timor, development of the $4.7bn Sunrise LNG project has been stalled for more than two years as the nations resolve how to split royalties.

Shell, the world's largest non-government producer of LNG, is struggling with projects in Nigeria because of rebel attacks and in Iran, where threats of sanctions over the nation's nuclear research program restrain investment. Iran has the world's second-largest gas reserves.

American politics also get in the way. BHP Billiton missed a target to win government approval in California for an $US800m import terminal near Malibu last year.

Celebrities including actors Pierce Brosnan, Halle Berry, and Tom Hanks, rock musician Sting and supermodel Cindy Crawford campaigned against the plant over safety concerns. The "not in my backyard" syndrome was among the obstacles in the US, Dr Greenspan said in June. "It's going to take a while" to increase supplies, he said.

Well most of the above still stands - except for 2005 read (in most cases) 2006 or even 2007 or 2008:-
Egypt is still moving forward but much more slowly than we thought last year (Exactly)
Nigerian activity is unlikely to move into EPC until 2007 - remember there are four major prospects (at the earliest)
Mauretania looks a long way off and Angola could be an EPC project in 2007 (Yes)
Skikda and Arzew will probably both proceed in 2006 (Well that was wrong)
The Iranian prospects were four a year ago, they are now two in number and their future is not yet certain. (Still moving slowly - but a lot of recent activity with Shell, Repsol and Total not discounting some early moves forward)
Yemen LNG is let and EPC execution underway
The Ras Gas and Qatargas major expansions are also let and under execution - huge Trains Huge projects - will keep Chiyoda , Technip and Snam busy and even Fluor have joined the 'gravy' train here (albeit offsites and utilities).
Nothing much is happening in Malaysia (an expansion Train possibly) or Indonesia (an expansion Train was shelved) and talk of a grassroots faculty in Sulewesi. Another former Chiyoda area is noticeably quiet. (And still quiet)
Australia has been the most active and surprising marketplace with Woodside Train 5 in execution, Chevron Gorgon moving in that direction and a number of FEED's in the planning stage with BHP, Woodside, Inpex etc leading the way.(Still moving slowly but at least some activity)
No sign of Sunrise yet or the Snohvit Expansion. The Sakhalin Expansion is planned but with the huge overspends on Phase one coming through this may move more slowly. (No change)
NW Russia remains very exciting - all the prospects I mentioned last year are still in play but there is probably someway to go before they reach execution. (even farther away now)
Peru is still looking good (It came good!) but Bolivia and Venezuela are probably still on the back burner. (Still on the back burner)

Summing up its tells you that the forecasting game is not easy (never has been) but that there is probably still a lot of work coming though that will surely test the metal of the so called, but now expanded 'LNG Club'.

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