By the OGJ Online Staff
HOUSTON, Sept. 4 -- Syntroleum Corp. said Tuesday its Syntroleum Sweetwater Operations Ltd. subsidiary signed a $599.5 million contract with the German engineering firm of Tessag Industrie Anlagen GMBH for engineering, procurement, and construction of its Sweetwater gas-to-liquids plant in Western Australia.
That clears one of the last major milestones before the Sweetwater project seeks financing, officials said.
The plant on the Burrup Peninsula will employ the proprietary Syntroleum process to convert natural gas into sulfur-free, synthetic specialty products such as lubricants, industrial fluids, paraffins, and transportation fuels.
The contract covers engineering, procurement, construction, pre-commissioning, commissioning and testing of the plant, plus personnel training. Tessag is a member of the RWE group of companies in Frankfurt, Germany.
The plant's capacity was increased to 11,500 b/d from 10,000 b/d as a result of pilot plant tests demonstrating higher conversion rates than those included in the original design basis.
The contract price increased from Tessag's February quote of $506 million, primarily as a result of a $35 million increase for Tessag's contingency and margin to more than $100 million, officials said. They said the price also was affected by additional product upgrading facilities; expanded operating parameters for the autothermal reformers and Fischer-Tropsch reactors; higher labor costs due to wage-rate inflation in Western Australia; and changes in currency exchange rates.
Mark Agee, Syntroleum president and CEO, said, "Based upon the increased capacity, third-party product price forecasts, and our current estimates of owner's costs, our economic model indicates over $100 million after-tax cash flow per year."
The contract includes substantial plant performance guarantees for a minimum 10,000 b/d throughput, product quality, product yield, gas consumption, emissions, and completion schedule. The contract schedules 35 months to mechanical completion of the plant, with financial incentives for successful startup and provisional acceptance by the client within 5 months afterward.
Previously, Syntroleum awarded a joint venture of PGS Production Services and Clough Engineering Ltd. a $215.4 million operating and maintenance contract for the plant (OGJ Online, Apr. 11, 2001).
