Veolia (NYSE: VE) Wins LNG Water Treatment Contract

Australian LNG Production


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BG Group Plc.’s (LON: BG) QGC Pty, a coal seam gas exploration unit, has said that it has awarded a contract worth $844 million to Veolia Environnement SA (NYSE: VE), Europe’s biggest water company.

The contract runs through 20 years and requires Veolia to operate and maintain two water treatment plants at the Queensland Curtis liquefied natural gas project site in Australia, as well as a third plant at QGC’s Windibri location (also in Queensland).

The two main treatment plants are already under construction at the Kenya and Woleebee Creek sites. Together, the plants can process about 200 megaliters a day at peak production. The Windibri plant is smaller, with a peak capacity of 6 megaliters.

water treatment veoliaQGC has high hopes for the Queensland LNG project, and it aims to make it the world’s first facility to convert coal seam gas into LNG; thus far, the company has said that progress is on schedule, with LNG production expected sometime in 2014 onward.

The company certainly been investing heavily in it. Bloomberg reports that QGC gave GE (NYSE: GE) Oil and Gas Australia Pty a contract worth $620 million for the upkeep of turbines and equipment at the site.

The facilities that Veolia will oversee, maintain, and service are intended to treat groundwater produced alongside the production of natural gas. Currently, QGC’s goal is to invest more than A$1 billion ($1.03 billion) in overall infrastructure to try and make use of this salty water which is usually discarded. Instead, QGC hopes to make it usable for agricultural purposes as well as for heavy industry and town usage.

Veolia’s processes will include ultrafiltration, ion exchange, reverse osmosis, brine concentration, as well as the usual pumping stations and electrical substations. Operations are set to begin from June this year, and the scope of Veolia’s operations means around 55 workers will be employed in the oversight and maintenance of all three plants.

From QGC’s press release, quoting Operations Director Walter Simpson:

“This is QGC’s biggest operational contract to date and local communities are poised to benefit for decades to come. As with all our major contractors, Veolia is committed under this 20-year contract to using local suppliers of goods and services. Communities will also benefit from our commitment to provide treated water for beneficial use. Almost 97% of our water is to be made available this way.”

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Water Treatment—The Way Forward for LNG?

With this water treatment project, QGC ought to be able to make liquefied natural gas production a whole lot cleaner, as well as reduce the total carbon footprint of its operations. Not only will large quantities of water—water otherwise wasted—be recovered and converted for further use, but it will also help reduce massive quantities of water run-off. Environmental agencies should be pleased.

More importantly, if QGC’s operations encounter substantial success, then more LNG operators and developers may implement similar programs at their own operations. LNG, after all, is a hot thing right now—particularly in Asia and the Eastern parts of the world.

Singapore is talking about setting up an LNG hub of sorts, and several other nations are interested. If LNG indeed becomes a big industry, then QGC’s water treatment venture may set an important precedent for other LNG developers.

BG Group originally went into Australia in order to develop coal seam gas acreage and a full-fledged LNG plant. Initially, BG Group aims to build a two-train 8.5 mtpa plant and begin LNG production from 2014 onward. After that, expansion is likely, as Australia is seen as a major production point for LNG.

BG tied up with QGC back in 2008 and wholly acquired QGC in 2009. BG has also been pushing into wider markets, entering into an agreement with China’s CNOOC (NYSE: CEO) for sales of 3.6 mtpa of LNG in 2010, and in 2011, with Tokyo Gas for 1.2 mtpa of LNG. Clearly, BG’s LNG strategy is wide-ranging.

As of now, BG’s production is mostly targeted toward Australia’s domestic market, supplying roughly 20 percent of all gas demand in Queensland. Ultimately, BG’s plan is to service both the Australian market and the Asia-Pacific base at large. That’s where developing LNG resources within Australia will play a key role.

BG is also involved in developing an expansive pipeline network that will help avoid bottlenecks once LNG production gets underway. 

 

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