UPDATE 1-Shell says Nigeria LNG project on schedule
Mon Nov 14, 2005 11:29 AM GMT
(Recasts, adds Shell, analyst comments, background)
LONDON, Nov 14 (Reuters) - Royal Dutch Shell Plc <RDSa.L> said on Monday that construction at its NLNG Nigerian liquefied natural gas project was on schedule despite a report in the Financial Times saying the project faced delays.
Shell spokeswoman Lisa Givert said the first three trains, or liquefied natural gas (LNG) production units, were operational and that construction of trains 4, 5 and 6 remained on schedule.
"We expect that NLNG is well positioned to meet all its contractual commitments to customers in 2006 and beyond," Givert said.
The FT report suggested the delays, which it did not specify, meant the Shell-led project faced a high risk of not meeting its contractual obligations to supply gas to customers.
The newspaper said this could cost the world's third-largest oil company by market value and its project partners more than $1.2 billion.
The FT said it had obtained a draft report of NLNG's five-year strategic plan dated Oct. 5, 2005, which said the project could face a shortage of as much as 50 cargoes in 2006 and 2007.
Shell's partners in the Nigerian Liquefied Natural Gas Co., or NLNG, are the Nigerian National Petroleum Corp., which owns a 49 percent stake; France's Total <TOTF.PA> with 15 percent; and Italian oil major ENI <ENI.MI>, which holds 10.4 percent.
According to the draft strategic plan, NLNG has put in place contingency plans to head off the possible cargo shortage, and if those measures are successful, the project will be able to meet its contractual obligations, the FT said.
Analysts at Citigroup said they were surprised by the FT report because Total hosted a site visit for analysts last week, at which no potential cargo shortfall was flagged.
On the contrary, "much emphasis was placed on the fact that there were already sufficient reserves for a seventh LNG train of 8 million tonnes per annum and that a ninth train was being considered," Citigroup said in a research note.
The plant, located on Bonny Island in southeastern Nigeria, produces 10.5 million tonnes a year of cooled gas for export on long-term contracts to Europe and North America, mostly for power generation.
Shell has been plagued by delays and massive cost overruns on large projects including its Sahkalin-2 LNG project off Russia's east coast and the Bonga oil project in Nigeria.
However, on Sept. 29, Shell Chief Executive Jeroen van der Veer told Reuters in an interview that NLNG was "on time, on scale and on budget."