Applying Learnings from Cameron LNG to Golden Pass LNG

Late last month Cameron LNG announced that its liquefaction project had commenced commercial operations of its first train. Recently, our friends at EPC Risks prepared a case study on the contractual risks incurred by the main contractor for Cameron LNG, CCJV, a joint venture between McDermott International, Inc. and Chiyoda International Corporation, under an Engineering, Procurement and Construction (EPC) lump sum turnkey contract for Cameron. While EPC Risks’ case study focuses on risks to the EPC contractors, the data it uses, principally found in the FERC filings we provide our customers, also provide insight into the project schedule risks for the project.

After receiving its FERC certificate in January 2015, Cameron expected that all three trains would be in-service by July 2018. That date has slipped a number of times, including one delay caused by a dispute between the project owner and the EPC contractor, CCJV. While train 1 entered service last month, Cameron received an extension from FERC to September 19, 2020 for the other two trains to enter service, but has indicated it expects that to occur in the first and second quarters of 2020.

Today, we look back at Cameron to show how analysis of the FERC filings would allow those interested in the project to anticipate problems with the schedule and then apply that knowledge to set the baseline for using similar techniques for ExxonMobil’s Golden Pass export terminal . As discussed below, the data in two early variance requests filed by Golden Pass provide key insights on changes in project design and work progress and bear continued focus over the next five years as the project progresses through construction.

Comparing the Projects’ Timelines

Cameron Liquifaction

Golden Pass

Early Signs That Cameron Wasn’t Going as Planned

In its Cameron case study, EPC Risks analyzed project data over the two-year period following the final investment decision for the project and identified two factors that indicated the project was already running behind schedule:

Estimated material quantities (i.e., dirt, concrete, steel, piping, etc.); and
Estimated labor hours.

One way to measure the accuracy of the estimate for material quantity is to watch the forecasted vehicle traffic and changes to those forecasts over time. For Cameron, in October 2014, it was estimated that there would be 3,260 vehicle trips per month to import dirt and concrete. By April 2016, the estimate had more than quadrupled to 17,800 vehicle trips per month. While the cost of fill and concrete is not a high percentage of a project’s budget, unexpected increases in such materials can impact schedule because the erection of structural steel and installation of pipe can’t start until the civil construction nears completion. Similarly, as shown in the chart below, Cameron’s estimate for on-site construction labor changed dramatically in that same time period.

Source: EPC Risks

Using Similar Metrics for Golden Pass

FERC originally authorized Golden Pass to begin site preparation on September 19, 2017, but no work was ever done under that authorization. In February 2019, the project sponsors announced that they had reached a final investment decision for the project. On March 1, 2019, Golden Pass submitted a refreshed implementation plan and requested authority to once again begin site preparation. On April 12, FERC reauthorized Golden Pass to begin its site preparation work.

We have reviewed the early filings of Golden Pass following its final investment decision and like Cameron, those filings contain some key data points that may be useful for keeping track of the project as it progresses over the next five years. In particular, Golden Pass submitted two variance requests that make changes to the assumed material quantities and labor hours that were used in the environmental analysis and will set the benchmark to be used for future project updates.

The Golden Pass environmental review was based on the assumption that a marine terminal would be constructed at the site, which would allow barges to deliver most of the construction materials. In its first variance request following the final investment decision, Golden Pass requested permission to shift almost all of the deliveries from barges to trucks. In addition, Golden Pass noted that it had redesigned the protective levy around the site and raised it by an additional four feet to provide added storm protection to the site. According to Golden Pass, this change increased the need for fill material by two million tons. The change in this material increase and method for delivering it to the site can be seen in the revised estimates for greenhouse gases during construction. What has not changed is that the projected emissions show that the project is still planning for a five-year construction period.

Barge and Truck Traffic Emissions

On June 21, 2019, Golden Pass also submitted a request to modify its work hours. Golden Pass indicated in this filing that the project’s approval was based on the assumption that work would occur between 7:00 am and 10:00 pm on weekdays, only. But due to inclement weather during the first few weeks of construction, Golden Pass requested permission to move to 12 hours of work during those same time periods but for all seven days of the week. In addition, Golden Pass indicated that, within the next three months, it was anticipating the need to request authority to work 24 hours every day, seven days a week, but would file that variance request when needed. Such changes may be an early sign that the schedule has limited flexibility for disruptions, but that the contractor and project sponsor are intent on maintaining the agreed schedule.

If you are interested in understanding whether projects such as these are staying on schedule, it is important to keep track of these changes that are approved by FERC and to be aware of other construction reports that are filed. Our alerting service can help you stay up to date on significant filings, but we also can provide you with a periodic dashboard that tracks the progress of all of the LNG projects. Please let us know if we can help in this regard.

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