Risks Archives - Webber Research

Noisy Neighbors: A Commonwealth LNG Deep Dive & Venture Global’s Engineering Update

Energy EPC: Venture Global’s Engineering Update & A Detailed Look At Their Commonwealth LNG

Note 1: As expected (and highlighted in our Commonwealth LNG Report below – initially published nearly two weeks ago), Venture Global has filed motion to intervene in Commonwealth’s project development due to its planned activity and dredging in the Calcasieu Ship Channel. We’ll continue to monitor.

Note 2: Over the next few weeks we’ll be rolling out a new line of Energy EPC research, centered around the unique and insightful analysis of EPC Risks. Please let us know if you have any questions, and we’re excited to share more details soon!***

Commonwealth LNG (CWLNG) is a proposed 8.4 MTPA LNG export facility located on a 393-acre site in Cameron Parish, Louisiana. The Project is on the west side of the Calcasieu Ship Channel (“the Channel”) near the entrance of where the Channel spills into the US Gulf of Mexico. The Project is also located directly across the river from Venture Global LNG’s (“VGLNG”) 10.0 MTPA Calcasieu Pass LNG (CPLNG) export facility (Figure 1).

In the 20-pages that follow, we’ve analyzed the CWLNG project and how the Project’s boundaries and shipping operations may be an issue for CPLNG, the State of Louisiana, and the U.S. Coast Guard. (Webber note: again – VG filed a motion to intervene after this piece originally went to clients in late February)

CWLNG’s execution plan is based upon modularizing the LNG process and pre-treatment units as well as the LNG storage tanks. Typically, a full containment 160,000 m3 LNG storage tank takes 36 to 42 months to construct and commission. CWLNG has proposed modularizing six (6) 40,000 m3 single containment LNG tanks…(continued pages 2-22)

Venture Global LNG: Calcasieu Pass Engineering Update – Details, Background, & Key Questions

Key Points:

CPLNG’s engineering, procurement, and construction workflow/ sequencing is not following “traditional” EPC industry standards. (Pages 2-3)
It’s too early to tell if that differentiated sequencing has helped expedite the project or if procurement and construction activities will be impacted in later stages. (Page 3-4)
CPLNG’s recent engineering filings point to significant, relatively late-stage engineering changes (at least by historical standards) that warrant monitoring from a cost and timeline perspective. (analysis on Pages 4-6)

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Venture Global LNG: Costs Ramping At Calcasieu?

Headcount, Parking Data Suggest Material EPC Inflation

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Construction Details: Pages 1-2
Parking & Headcount estimates Pages 2-3
Previous CPLNG Cost Curve Page 3
Our New CPLNG Labor Cost Estimates Page 3
EPC Costs – Expanded Page 4
Key Questions From Here Pages 4-5

Forcasted Ramp In Craft Labor Headcount Indicate Costs Likely Trending Above Plan. Recent filings indicate that Calcasieu Pass LNG’s (CPLNG) average on-site workforce is set to more than double compared to company Pre-FID plans, while also introducing a night-shift. While there are likely several variables in play here, we believe the data (analyzed in the pages that follow), suggests that CPLNG’s on-site craft labor costs could increase materially……(data and our estimates on pages 2-5).

Parking Lot Infrastructure: In addition to the craft labor increases, there’s usually an increase in both indirect construction support infrastructure and the associated cost for that infrastructure. An example of this phenomenon is the reported increases by CPLNG in parking lot infrastructure. While not usually top-of-mind, ancillary factors like parking carry a real cost for projects this large, and significant increase in parking requirements would be felt in a projects budget. This same correlation is true for other indirect costs like lunch tents, lavatories, office spaces, personal protective equipment, health & safety supervision, small tools and consumables, radios and other IT equipment, trash removal, security, craft training, and on and on. That trend in data over the past year shows….(continued on pages 2-3).

While there could be several explanations for the ramp in labor (too many to list within a single note), if we were stakeholders we’d want to understand what’s actually driving the ramp in labor, and how any associated overrun in direct and indirect costs are being accounted for by CPLNG. While our cost overrun estimate (pages 2-3) is just that – an estimate – we’re confident the
fundamental relationship between labor head count and project costs have us pointed in the right direction.
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