Malaysian energy giant Petronas has decided the winner of the coveted engineering, procurement, construction and commissioning contract for its latest floating liquefied natural gas facility, ending weeks of industry buzz as to whether the operator would ultimately favour niche experience over potential up-front cost savings.

South Korea's Samsung Heavy Industries and JGC of Japan have landed the prized EPCC contract for Petronas’ $2 billion-plus nearshore FLNG development known as ZLNG in Sabah, East Malaysia.

An informed source told Upstream that the duo, which earlier successfully delivered Petronas’ second FLNG project — PFLNG Dua, last week was awarded a Letter of Intent for ZLNG. The 2 million tonnes per annum barge-based ZLNG facility will be built at Samsung’s Geoje Island yard with JGC handling the topsides.

The contractors appear to have now confirmed their win, with Japan's Nikkei reporting that JGC will indeed be responsible for engineering, procurement and construction of the production system (topsides) - the scope is estimated to be worth more than 100 billion yen ($753 million) to JGC.

Meanwhile, Samsung reportedly said its contract is worth 1.9611 trillion won (approximately $1.5 billion) and the facility will be delivered by August 2027.

The triumphant pairing beat a rival consortium led by Italy’s Saipem, which had performed a parallel paid-for front-end engineering and design study throughout much of this year.

While Petronas’ decision went down to the wire, according to contracting sources in Kuala Lumpur, one factor in its ultimate choice is understood to have been the uncertainty surrounding Saipem’s partner despite several sources claiming that the Saipem-led joint venture had submitted the lower price bid.

Samsung Heavy Industries told Upstream that it cannot disclose any information about the project.

Upstream had also approached JGC and Saipem for comment.

Potential change of yard

The initial grouping contesting the ZLNG EPCC contract and performing the dual FEED work comprised Saipem and China’s Hudong-Zhonghua Shipbuilding with support from Ranhill Worley.

However, Hudong-Zhonghua subsequently decided to withdraw to focus on its buoyant LNG carriers business — it currently has nine such vessels under construction.

China-based industry sources suggested an 11th-hour twist to the ZLNG tender contest was on the cards after Hudong-Zhonghua recognised that its current workload is very high and it might not have yard capacity to take on ZLNG.

More sources said that China Merchants Heavy Industry (CMHI) had been approached to be a backup to the Saipem consortium, and it has yard availability due to the recent postponement of the Gato do Mato floating production, storage and offloading vessel destined for Brazil.

BW Offshore had just released its dry-dock reserved at CMHI for the Gato do Mato FPSO, which could have accommodated the ZLNG construction.

However, Saipem ultimately teamed up with China's Wison Offshore & Marine to chase the ZLNG job, according to Upstream's sister publication Tradewinds.

The price originally offered by the Saipem-Hudong-Zhonghua-Ranhill Worley consortium would have still applied to its submission with the new Chinese partner, a source said.

The JGC-Samsung combination was the main contracting group that in 2020 successfully delivered the second of Petronas’ two existing FLNG vessels — the first (PFLNG Satu) was constructed by Daewoo Shipbuilding & Marine Engineering with then-Technip as the engineering partner.

Petronas had planned before the end of 2022 to take the final investment decision for its ZLNG nearshore project to be ready for start-up at the end of 2026 although it is understood completion is now targeted for 2027.

However, project sanction and formal award of the ZLNG EPCC contract could slip into early next year given Petronas' decision on the winner took longer than was originally intended.

Petronas last week told Upstream it was not able to give any immediate comment on the status of the ZLNG project but would respond “as soon as possible”.

Upstream has again reached out to the Malaysian energy giant for an updated comment.

Benign conditions

The ZLNG floating liquefaction facility is intended for deployment in a benign shallow-water environment, and Petronas has teamed up with Sabah Oil & Gas Development Corporation (SOGDC) for this project.

The newbuild barge-based floating liquefaction vessel will be moored to a jetty near the Sipitang Oil & Gas Industrial Park (SOGIP) in Sabah, East Malaysia. The FLNG project is Petronas’ third but its first such nearshore development.

The entire project involves an onshore substation, a new jetty head and trestle at Petronas’ Chemicals Fertiliser facility at SOGIP, plus a two-kilometre subsea pipeline, 24-inch and six-inch diameter onshore pipelines and a gas metering station — as well as the FLNG vessel itself.

Petronas is understood to be weighing up its options to power the ZLNG project, either via a new gas-fired power plant or taking volumes from Sabah utility SESB’s grid.

Improved production uptime

Petronas earlier said that design and construction of the ZLNG facility is expected to be simpler and, upon completion, has the potential for improved production uptime as it will be located within a protected bay area, compared with an FLNG vessel deployed in open water.

“The development of Sabah’s first nearshore LNG plant reflects our technological expertise where we continue to innovate modern solutions to monetise gas resources in an optimised and environmentally friendly manner,” Petronas’ then-chief executive of gas and new energy, Adnan Zainal Abidin, said last year.

Updated to include confirmation from JGC and Samsung Heavy Industries.

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