Equipment shortages add pressure to LNG plant costs, Kiewit says
New LNG plant construction costs up to 30% in five years
Higher costs reflected in tariffs charged new customers
Wages up 20%
By Curtis Williams
HOUSTON, Sept 19 (Reuters) -The boom in U.S. construction of liquefied natural gas (LNG) plants has led to shortages of generators, electric motors and transformers, contributing to higher costs and construction delays, Kiewit Energy President Tom Shelby said on Thursday.
Equipment shortages and rising costs for equipment, wages and cement have driven up the cost of constructing new LNG plants by between 25% and 30% over the last five years, Shelby said, noting that wages have increased by 20% in keeping with inflationary costs.
Kiewit, among the largest U.S. contractors, has been involved in building LNG plants including Venture Global's 12 million tons per annum (MTPA) plant at Calcasieu Pass, Louisiana.
"For most of my career transformers from order to supply took one year. Now, it's up to nearly two years," Shelby told Reuters on the sidelines of the Gastech conference in Houston.
Separately, energy researcher Wood Mackenzie said fees LNG developers charge new customers to liquefy gas have been climbing.
Twenty-year gas processing deals signed in 2022 and early 2023 were priced between $2.15 per million British thermal units and $2.30/mmBtu. More recent deals have put tariffs in the $2.40/ mmBtu to $2.50/mmBtu range, Wood Mackenzie said.
Equipment availability can no longer be taken for granted, and shortages have been compromising quality.
"It affects us as an EPC (engineering, procurement and construction) contractor in terms of the quality and the time," said Shelby.
There are five LNG plants under development in Texas and Louisiana and 16 others on the drawing board looking to secure investment and customers. The five under construction would add a combined 86.6 million metric tons per annum (MTPA) of the superchilled gas.
Work at Golden Pass LNG, one of the largest U.S. projects, largely halted after its main contractor ran $2.4 billion over the original budget and filed for bankruptcy earlier this year. The project's joint owners, QatarEnergy QATPE.UL and Exxon Mobil XOM.N, recently asked for a three year extension to their construction permit.
Reporting by Curtis Williams in Houston; Editing by David Gregorio
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