ABU DHABI - The Costs & Wider Implications.

BP had strived to cut costs across the board before oil prices collapsed in 1998. So the third train and associated installations and storage tanks cost about $1.3 bn. The contract to build the third train was worth around $600m, awarded to Chiyoda Corp. of Japan which lowered its price to help the project's economics. Chiyoda's move was followed by a price war among international contractors.

The price war worsened in March 1996 when JGC/Kellogg won the contract to build the 6.6m t/y RasGas LNG plant in Qatar at a price of $1 bn. The loser was Chiyoda, which had bid a little over $1 bn. But Chiyoda fought back seven months later in Oman.

A Chiyoda/Foster Wheeler partnership on Nov. 14, 1996 signed with Oman LNG the contract to build a 6.6m t/y LNG complex for $1.2 bn, i.e. about $182m per 1m t/y capacity. (In the 1980s, the going price for construction of a grassroots plant was $600-900m per 1m t/y capacity. So one could see how far plant costs came down).

However, since 2002 costs have risen as contractors have stopped their price war, mainly in the Middle East where oil income has been rising steadily since 1999.