Rethinking how we build the next generation of LNG projects in America

Paul Varello's picture
Paul Varello, President & CEO, Commonwealth LNG
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Having spent more than 50 years in the engineering and construction industry, I’ve had my share of great projects and not-so-great projects. Most of us would agree that we learn more from bad experiences than from good ones.

Over the past 15 years, LNG projects have experienced major cost and schedule challenges. In fact, 10 of the last 12 LNG projects have exceeded their planned budgets and schedules; some by as much as 50%.

I believe two factors represent, in great part, the root causes of these cost and schedule issues. They are project size and the shortage of qualified manpower.
The cost of LNG projects is astounding. The total installed cost on every project is expressed in multiple billions of dollars. In Southern Louisiana, there is more than $100 billion worth of LNG projects planned or currently under construction.  Along the Texas Gulf Coast, there’s another $80 billion of such projects.

If those LNG projects were built in the field over a 5-year period, it would require an average workforce of almost 100,000 craft personnel. That figure does not include workers needed for non-LNG projects built during the same time frame. It is abundantly clear that there will not be adequate numbers of qualified craft workers to build these megaprojects on time and within budget and that circumstance is not likely to improve.

For one thing, young people have little interest in pursuing a career in construction. While the pay is good, the work environment is often very difficult. Hours are long, weather conditions, either hot or cold, are always a factor and, employment duration is never long. In fact, if a craft person is good at what they do, they’ll work themselves out of a job every one or two years and will need to seek employment elsewhere.

The reality is that it is becoming more and more difficult to build megaprojects on time and within budget in America. The sooner we accept this reality, the sooner we’ll be able to make the changes necessary to restore excellence in construction performance. It should never be acceptable to spend twice as much money than necessary and take twice as long to build a mega project in America.

So, what are some of the answers? Well, part of the answer is to adopt a modular construction approach. The project would be designed in a modular configuration and built-in offsite fabrication yards where skilled labour is plentiful, well-trained, productive and less expensive. Those yards are located along the Louisiana, Texas and Mexican Gulf Coast as well as in China, South Korea, Indonesia and other international locations.

With today’s self-propelled modular transporters (SPMTs) and specially built ships, modules the size of football fields can be successfully fabricated, loaded and shipped to destinations around the world. One of the best examples of a successful modular project was the Yamal LNG Plant in Russia. For that project, more than 200 modules, weighing as much as 6,000 tons, were fabricated in China and then loaded and shipped to the jobsite North of the Arctic Circle. 

While labour costs in offsite fabrication yards will be less expensive than in the field, there are added costs to the modular construction approach including additional structural steel, increased shipping and logistics, yard inspections, duties and insurance to name just a few. However, when ALL costs are considered, modular construction is still significantly less expensive than field construction. In addition, cost, schedule, quality and safety targets are far easier to achieve in fabrication yards then on construction sites.

For our Commonwealth LNG Project in Cameron Parish Louisiana, we will be maximising the use of modular construction. We have laid out our plant in 6 identical liquefaction trains with each train consisting of two large modules. We will design a train just once and then fabricate six identical trains from that one standard design. We will use the same modular approach in designing and fabricating our LNG storage tanks, pipe racks and auxiliary equipment units. 

By utilising a modular approach on our Commonwealth LNG Project, we expect to transfer approximately 70% of construction workhours from the field to offsite fabrication yards. Having fewer workers on-site will also have the benefit of decreasing the impact on the local community and its infrastructure. 

When we build the next wave of LNG projects in America, we must learn from our experiences. We must think differently and more creatively about HOW we can build more efficiently and how we can minimise the impact on the communities that will be our neighbours for many years to come. At Commonwealth LNG, we believe that modular design and construction is the answer. 

If you would like to hear more from Mr Varello, book your delegate pass now for the upcoming Gastech conference and attend the Global Business Leaders’ Panel: What is Needed to Overcome the Significant Challenges Faced by the Next Wave of Supply Projects to Relieve Anticipated Market Tightness Post 2023?

Gastech 2019 is fast approaching (17-19 September). Register now for free to join 35,000 international attendees and 700+ international exhibitors across the entire energy value chain.