Negotiations with the EPC Contractor for LNG Terminal in Poland concluded

Source:Polskie LNG S.A.

Completion of the construction and first delivery of liquefied natural gas yet in this year, no additional contract payments, higher liquidated damages and extended contractor’s liability.

Completion of the construction and first delivery of liquefied natural gas yet in this year, no additional contract payments, higher liquidated damages and extended contractor’s liability. Polskie LNG and the Consortium in charge of construction of the LNG Terminal in Świnoujście concluded negotiations on project completion.

Under the Annex to the EPC Contract of 15 July 2010 signed today, the EPC Contractor – a consortium led by Italian company Saipem – committed itself to complete construction works and receive the first LNG cargo yet this year. The first gas cargo, after cooling-down the installation, start-up and tests will be injected into transmission grid and delivered to Polish end-users. The second delivery of fuel designated for operational tests will be supplied in the first quarter of the coming year, while commercial operations of the LNG Terminal will commence in the second quarter 2016, once the Acceptance Protocol is executed. This interim period, ensuring full operationability of the LNG Terminal, warrants that all relevant safety and quality requirements are met.

Under the said Annex, the contractual lump sum remuneration due to the EPC Contractor will remain unchanged, thus the Investor will not incur any additional expenses in relation to project implementation. Moreover, the EPC Contractor (Consortium) accepted higher liquidated damages in case of a default on timely delivery. The total contractual lump sum remuneration amounts to PLN 2,4 billion. I addition to this, the Contractor assumed additional liability for the process of delivery of LNG for the purpose of Terminal’s start-up, not included in the contract before.

‘The Contractor assured that the dates specified in the updated detailed schedule of works are reliable are ultimate. The Consortium also assumed additional obligations and liabilities regarding in particular the delivery of LNG for technical purposes’, said Jan Chadam, CEO of Polskie LNG.

The Parties agreed to conduct additional technical audit of the entire installation. Upon completion of all construction works, a detailed inspection will be carried out by an independent international auditing body having relevant qualifications and experience. Its objective is to prove the highest quality of installation which has been supervised by the Transportation Technical Supervision (TDT), Investor’s Supervision (Multiconsult Group), whereas certification of key installations was entrusted to a notified body (TÜV Nord Hamburg). Polskie LNG Company hereby informs that to date there were almost 50 thousand detailed inspections of installation performance conducted, and consequently there were almost 250 thousand reports required under Project Quality Control Plan issued. Under the EPC Contract, the Consortium is obliged to acquire all documents required by existing regulations and permits for operations pursuant to Polish law. 

Investor’s entering into negotiations with the Contractor, as well as executing an annex to the contract and updating the schedule is aimed at timely completion of the project and to ensure that the highest quality criteria are met. The absence of a binding schedule hampered the progress in project implementation. Project’s progress status, according to EPC Contractor’s reports, is 98,2 %. To date, all terminal equipment has been successfully delivered to the site. In parallel with finishing construction works, a number of tests and commissioning activities is ongoing along with preparation for preliminary start-up. There are on average 1000 persons working at the site each day. 

The LNG Terminal is an important component of Poland’s energy security system. Together with new gas pipelines, interconnectors, virtual and actual reverse flow on the Yamal gas pipeline and with underground storage capacity and domestic production will reinforce the foundations of our gas sovereignty. The project will allow Poland to receive natural gas delivered by sea actually from any place in the world. The initial regasification capacity of the plant will amount to 5 bcm per year and will cover a third of Poland’s annual gas demand. Currently, the Investor is conducting feasibility study for extension of the plant’s capacity by 50% (to 7.5 bcm per year).

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