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Cablegate: Bechtel Signs Mega Lng Construction Contract

VZCZCXRO6987
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLU #1271/01 3541924
ZNR UUUUU ZZH
P 201924Z DEC 07
FM AMEMBASSY LUANDA
TO RUEHC/SECSTATE WASHDC PRIORITY 4504
INFO RUEHJO/AMCONSUL JOHANNESBURG PRIORITY 0482
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 LUANDA 001271

SIPDIS

SENSITIVE
SIPDIS

FOR AF/S
JOHANNESBURG FOR FCS

E.O. 12958: N/A
TAGS: EPET EIND ECON AO
SUBJECT: BECHTEL SIGNS MEGA LNG CONSTRUCTION CONTRACT

LUANDA 00001271 001.2 OF 002


1. (SBU) Summary. On 10 December 2007, the Angolan LNG
Consortium and Bechtel Corporation signed multi-billion
dollar contract to build the Angola Liquified Natural Gas
(LNG) plant in Soyo. Bechtel is concerned about possible
problems in getting Angola visas for the approximately 4,000
expatriate workers and securing timely customs clearance for
an expected 11,000 shipments of cargo. End Summary.

2. (SBU) On 18 December 2007, Terry Valenzano, Bechtel's
Country Manager for the Angola Liquified Natural Gas (LNG)
plant and Ricardo Cardiga, Local Content Manager, informed
the Ambassador that Bechtel had signed on December 10, 2007,
an agreement with Angola LNG, giving Bechtel multi-billion
contract to build the LNG plant at Soyo. The signing of the
massive contract was done privately; the development will be
announced with fanfare after the new year begins. The
construction project will be Angola's largest engineering
project ever.

Building an LNG Plant
---------------------

3. (SBU) Angolan LNG's shareholders made their final
investment decision on the plant on 10 December. Angola LNG,
a consortium led by Chevron, the eventual operator (36.4
percent ownership), with British Petroleum (13.6 pct ),
Sonangol (22.8 pct.), Total (13.6 pct) and ENI (13.6 pct.) as
shareholders, is building the LNG plant mainly to serve the
U.S. market through a terminal in Pasacagoula, Mississippi.
(Note: ENI recently bought its share from Sonangol. End
note.) (Note: A recent media report said Daewoo would build
4 LNG carriers for the project, three to carry gas to the
U.S., one to an unspecified European destination. End note.)

4. (SBU) Bechtel is to build the LNG plant in 48 months,
and gas shipments are scheduled to begin in February 2012.
The Boskalis Corporation (Netherlands) spent much of 2007
preparing the site, extending the shoreline and building
jetties. Others are at work to upgrade the Soyo port.

5. (SBU) Bechtel will continue with site and soil
preparation during 2008; actual plant construction will begin
only in 2009. Bechtel has been lining up aggregate (gravel)
suppliers in Angola, and expects to be able to procure some
other goods locally. Bechtel expects to import most of the
project's cement from China. Valenzuela was intrigued that
larger quantities of Angolan cement might come on the market
if the Palancas Cimentos project at the Port of Lobito goes
into production in time. (Note: Current Angolan cement
production can meet only a fraction of the local construction
industry's demand, causing retail cement prices to soar in
recent months. End note.)

Angolan Content and Angolan Employees
--------------------------------

6. (SBU) The GRA requires Bechtel to hire a minimum number
of Angolans, and give preference to residents of Soyo city
and surrounding Zaire province. The GRA has given Bechtel
unusual flexibility to hire expatriates, in the interest of
keeping the project on schedule. The GRA is serious about
hiring locals: Boskalis had to let go some employees it had
engaged from Cabinda Province. Valenzano explained most
locals would work on the project for only about 18 months.
They will be semi-skilled and unskilled workers, who should
have marketable skills when they finish with the Soyo
project.

Visas and Customs
-----------------

7. (SBU) At its peak, a multinational workforce of
approximately 4,000 will work on the project, mainly from
Philippines, Thailand, India and China. Bechtel hopes to use
labor brokers to courier bundles of passports to the nearest
Angolan Embassies for needed visas. About 120 employees will
come from the United States. Valenzuela is concerned that
Angola's Houston Consulate recently reduced its visa service
from five to one day per week, and now makes applicants wait
eight days for their passports. Valenzuela hopes a dedicated
Angolan Customs office in Soyo will keep the project's 11,000
shipments moving quickly through the port.

Comment
-------

8. (SBU) The Soyo LNG plant is a key strategic addition to

LUANDA 00001271 002.2 OF 002


Angola's developing economy. The plant would capture gas now
being flared or reinserted into the seabed. With a signed
contact in hand, Bechtel now becomes another major American
private sector player in Angola, bolstering further the huge
role of U.S. companies in the Angolan economy.
MOZENA

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