Kiewit: Equipment shortages increase costs of LNG plants

Tom Shelby, Kiewit Energy's President, said that the boom in U.S. LNG plant construction has caused shortages of electric motors, transformers and generators. This has contributed to increased costs and construction delays.

Shelby noted that equipment shortages, rising costs of wages, cement and other materials have increased the cost to build new LNG plants between 25 and 30 percent over the past five years. Wages have also increased by 20 percent in line with inflationary costs.

Kiewit is one of the largest U.S. contractors and has built LNG plants, including Venture Global's 12-million-ton-per-annum (MTPA), Calcasieu Pass plant in Louisiana.

"For the majority of my career, transformers were delivered from order to delivery in one year. Shelby said on the sidelines at the Gastech Conference in Houston that it now takes nearly two years to produce a transformer.

Wood Mackenzie, an energy researcher, said that the fees charged by LNG developers to new customers for liquefying gas are on the rise.

The price of the 20-year gas processing contracts signed in early 2023 and 2022 ranged between $2.15 and $2.30 per million British Thermal Units. Wood Mackenzie reported that more recent deals had tariffs between $2.40/mmBtu and $2.50/mmBtu.

It is no longer possible to take equipment availability for granted. In addition, shortages are affecting quality.

Shelby said that the EPC contractor (engineering procurement and construction) was affected by the lack of quality and time.

Five LNG plants are under construction in Texas and Louisiana, and 16 more are on the drawing boards to attract investment and customers. The five LNG plants under construction will add 86.6 million metric tonnes per annum of supercooled gas.

Golden Pass LNG is one of the biggest U.S. projects. Work has been largely stopped after the main contractor filed for bankruptcy in early this year, having run $2.4 billion above the budget. QatarEnergy, Exxon Mobil and the joint owners of Golden Pass LNG have recently requested a three-year extension to their building permit. Reporting by Curtis Williams, Houston; Editing and production by David Gregorio

(source: Reuters)