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FLNG takes centre stage

Floating LNG is soon likely to provide virtually all new export capacity in West Africa

A new era for West African liquefied natural gas exports began when the Hilli Episeyo floating LNG (FLNG) facility started test production off Cameroon in March. It could be the first of at least half a dozen similar vessels to be deployed in the region in the next five years or so.

The Hilli Episeyo, which has a production capacity of 1.2m tonnes a year, was due to ship its first cargo in May from the Kribi development off southern Cameroon, operated by French firm Perenco. All output is to be sold to Gazprom Marketing and Trading for eight years, drawing on 500bn cubic feet of gas from the Sanaga Sud and Ebome fields.

If it operates smoothly, the Hilli Episeyo facility, which was built on a converted LNG tanker by Golar LNG at the Keppel Shipyard in Singapore, could provide a template for the sector. The Golar Gandria LNG carrier is also being converted at the Keppel yard with the aim of deploying it at Ophir Energy's proposed Fortuna FLNG project in Equatorial Guinea. That 2.2m-t/y project, which Ophir wants to get into production by 2021, has been struggling to get its financing in order.

After talks with a group of Chinese banks collapsed, Ophir turned to other Asian lenders, including the Industrial and Commercial Bank of China, for funding. Yet, in May, it remained unclear how the new talks were progressing, with some reports suggesting the Chinese bank may have got cold feet.

Golar has a vested interest in Fortuna, as it has a stake in the project itself through OneLNG, a joint venture with Schlumberger. However, the company may not view pushing ahead with the tanker conversion for Fortuna at this stage as a massive risk, as it expects to receive further orders for its FLNG design, for which the Gandria could be re-designated.

At least one Golar vessel looks set for BP's Greater Tortue development of reserves straddling the Mauritania-Senegal border. In March, Golar signed a preliminary agreement with BP, putting the former on standby to start preparing a vessel for the project later this year. BP hopes to take a final investment decision on the development before the end of 2018, with a view to producing around 2.5m t/y from around 2021. The company is said to be considering using further FLNG facilities, possibly three in total, for future expansion of the development, which could encompass more than 20 trillion cf of reserves.

Other FLNG ventures are also plannedthough less certain to go ahead at this stagefor smaller projects in Cameroon and Congo-Brazzaville led by London-based NewAge, which has been looking at leasing arrangements for FLNG facilities, possibly to be built in Chinese shipyards.

There are many reasons why West Africa is popular with FLNG developers. The technology offers a relatively cheap way for small companies with limited financial resources to produce from what would otherwise be stranded assets. If estimates that Golar's FLNG facility for the Kribi development cost some $1.2bn are correct, that would be less than a fifth of the estimated cost of Petronas' PFLNG Satu facilitythe first FLNG project to become operationalwhich has a similar capacity. Construction costs can be expected to fall further as the sector becomes more mature.

Using FLNG should also reduce political and operational risk sometimes associated with building onshore LNG plants in the developing world. In the case of BP's project, positioning its first LNG export facility offshore close to the Mauritania-Senegal maritime border reduces the scope for disagreements between the two countries over the siting of any onshore plant.

Operational issues with onshore plants can be seen at the 22m-t/y Nigeria LNG, the region's largest export facility, located on Bonny Island off the Niger Delta, where NLNG hopes to add two trains to the existing six. However, with those trains consistently running below capacity due to supply disruptions, receiving the go-ahead for two more is no certainty.

Regardless of what happens in Nigeria, LNG exports from the region look set to expand rapidly over the next decade—with the proviso that FLNG proves to work as well in practice as its proponents say it will. At present, western Africa has around 33m t/y of onshore capacity, embracing NLNG, Angola (5.2m ty/), Equatorial Guinea (3.8m t/y) and Cameroon (2.4m t/y). By the early 2020s, that figure could surpass 40m t/y.

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