Announcement of contract
7 June 2003
The 880MW Skikda Power Plant has come on line in the Algerian coastal city of Skikda. The project is thought to have cost $562m. It was awarded to SNC Lavalin Constructors International Inc. on 7 June 2003, with a $350m guarantee for financing General Electric gas-fired turbines.
SNC Lavalin Constructors Inc.(the Washington-based subsidiary of Canadian SNC Lavalin) also provided engineering and procurement services for the project. Associated integrated seawater desalination units provide water for the plant. Skikda is part of a wider government programme to generate more power from the country’s own gas reserves.
The power station has two 440MWe units, each consisting of a GE LM2500 gas turbine and associated heat recovery steam generators (HRSGs) and steam turbines. GE/ALSTOM also supplied the HRSGs and two 195MW Frame 9FA steam turbine generator sets and two Heat Recovery Steam Generators (HRSGs) for the site.
The HRSGs use ALSTOM’s OCC (Optimised for Cycling and Constructability) technology. Components for the HRSGs were predominantly supplied from the US to meet customer requirements.
ALSTOM provided technical field advisers during the erection and commissioning phases. SNC Lavalin also gave Alstom a $1.7m order for the company’s ALSPA P320 Decentralised Control System.
FINANCE FROM LONG-TERM EX-IM LOAN
Skikda is a port on the Gulf of Stora, on the Mediterranean. It transports mainly agricultural and mineral products, and is the port for Constantine. There are natural gas, oil refining and petrochemical industries and associated pipelines.
In December 2003, the Ex-Im Bank (Export-Import Bank of the US) approved a $192m long-term loan guarantee for the Skikda project. The bank has invested more than $840m in Algeria, which is a growing and important market.
The borrower for the project is Shariket Kahraba Skikda (SKS), which was specially formed to develop the project by two Algerian state-owned energy companies, Sonatrach and Sonelgaz. Sonatrach and Sonelgaz provided 12-year guarantees to Ex-Im Bank. The tenders to design and construct the site were invited by Algerian Energy Company Spa (AEC).
MODERNISING AND OPENING ECONOMY
Algeria is modernising and opening its economy to trade globalisation. The country is strengthening its position as an ‘Energy Bridge’ between Africa and Europe, and is aiming to supply the US.
Trade volume between Algeria and the US should increase following Ex-Im’s decision to suppress its credit ceiling limits. In September 1999, Ex-Im granted a $300m credit line and OPIC (the Overseas Private Investments Corporation) stated its readiness to guarantee up to $1bn of American investments in Algeria. US investments already total $4bn, mainly in upstream hydrocarbons.
After years of political unrest, Algeria is seeing economic improvement based largely on the increasing oil and natural gas exports. GDP (Gross Domestic Product) grew around 6% in 2004. There are serious problems in the country though, including greater than 30% unemployment, political violence, labour unrest, a large black market and natural disasters.
The country has huge confirmed oil resources, and is increasing crude production capacity to an estimated 1.5 million barrels/day for 2005. Gas exports have doubled since 1990, and should increase from 60 billion cubic metres/yr to 85 billion cubic metres/yr by 2010.
Algeria’s vast sedimentary basins are relatively untapped. There are eight wells per 10,000km², as opposed to over 100 at the global level and 500 in the US. Exploration and development of upstream reserves have significantly increased in recent years, with many contracts signed with foreign companies.
The country has important petrochemical projects for producing aromatics and olefins in Skikda. It is also renewing, modernising and upgrading its refineries. For example, Sonatrach has launched a
series of restructuring projects including two new pipelines linking Algeria to the EU.
EXPORTS TO EUROPE PREDOMINATE
Algeria exports around 90% of its crude oil to Western Europe, mainly to Italy, Germany, France, the Netherlands, Spain and Britain. The country has seven coastal terminals for crude and refined oil, natural gas liquids and liquefied natural gas (LNG) exports. They are at Arzew (largest), Skikda (second largest), Algiers, Annaba, Oran, and, in Tunisia, Bejaia and La Skhirra. Skikda transports around a quarter of exports but takes only 80,000t tankers and needs dredging to take larger tankers.
In January 2004, a boiler exploded at the Skikda LNG export terminal. It killed nearly 30 people and shut down operations at several nearby facilities. The government promised to build two new LNG trains in Skikda that could cost up to $800m. These should have double the volume of the three units that were destroyed.
Electricity demand is growing at around 6% per year. Algeria has about 6GW of installed power generating capacity, but may need an extra 8,000MW by 2010. There have been power and water shortages in the country, however, which in July 2003 led to demonstrations and rioting.
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