Deal signed between McDermott and Chiyoda to complete the Cameron LNG project in Louisiana, US

July 18, 2019

McDermott International from the US and its joint venture partner Chiyoda of Japan, have reached an agreement with California based operator, Sempra Energy to cover remaining work on the delayed Cameron liquefied natural gas (LNG) export project in Louisiana, US.

The $10 billion Cameron LNG project faced delays in late 2017 and early 2018. As many as 11,000 workers were on site last summer as McDermott International and Chiyoda pushed to get the project back on track. McDermott recently said that startup of trains 2 and 3 will be delayed until September 2020. The project was recently granted a deadline extension by the US Federal Energy Regulatory Commission (Ferc).

The new agreement “provides the opportunity for incentive bonus payments for achieving construction and commissioning milestones on specified dates for Trains 2 and 3,” McDermott said.

McDermott and joint venture partner Chiyoda, has provided engineering, procurement and construction for the project but has had to cope with huge losses on its earlier phases.

McDermott also said the agreement aligned start dates “for any schedule-related liquidated damages to be consistent with the current schedule” and strengthens the commitment of the joint venture partners to complete the project according to the current schedule.

In response to the agreement, the operator, Sempra said “We believe it is reasonable to expect that the overall economics of Cameron LNG will not significantly change as a result of this agreement. Sempra Energy’s projected share of full-year run-rate earnings from the first three trains at Cameron LNG continues to range between $400 million and $450 million annually”.

McDermott has said the project was around 90% complete as of the end of the first quarter of 2019, with initial production from Train 2 expected in the first quarter of 2020 and from Train 3 scheduled for the second quarter 2020.

Key dates for the Cameron LNG project:

Cameron LNG obtained approval from the U.S. Department of Energy (DOE) in 2012 to export up to 14.95 million tonnes per annum (Mtpa) or approximately 2.1 billion cubic feet (Bcf) per day, of domestically produced LNG to all current and future Free Trade Agreement (FTA) countries and non-FTA countries. This is the second final non-FTA authorisation issued to a liquefaction project in the U.S. by the DOE to date.

In 2014, the Federal Energy Regulatory Commission (FERC) issued the final environmental impact statement to construct and operate the liquefaction facility. FERC authorized the project in June 2014.

In May 2016, Cameron LNG received FERC’s authorization to proceed with expansion of the existing liquefaction export project (two additional Trains and two additional LNG storage tanks). Cameron LNG has received authorization from the DOE to export LNG produced from the Expansion Project to all current and future Free Trade Agreement (FTA) and non-FTA countries.