More LNG from Equatorial Guinea, but production start-up uncertain
Marathon Oil says the world LNG market will not support Equatorial Guinea's planned second train until 2016-17, but the government wants an earlier start-up – and has pressure to apply, Martin Quinlan writes
THE MOVE into liquefied natural gas (LNG) has been a success story for Equatorial Guinea. The Marathon Oil-led EG LNG complex, on Bioko island, was completed ahead of schedule and has been producing in excess of its 3.4m tonnes a year (t/y) nameplate capacity for approaching three years.
But the government's plans for a rapid repeat of the success with the construction of a second train – which by now should have been nearing completion – have not run so smoothly.
With hindsight, the delay might have been fortuitous, because contracts would have been awarded when construction prices were at their peak, yet the train would be starting up in the present oversupplied LNG market. But complications, rather than great foresight, seem to have been behind the delay.
The government's vision for the new train was to make Bioko island a gas-liquefaction hub for the Gulf of Guinea region, drawing on feed gas supplied – in ground-breaking cross-border agreements – by Nigeria and Cameroon, as well as indigenous natural gas production (PE 2/07). But, although the two countries received the idea favourably, detailed agreements have still not been made and both continue to pursue plans for their own new LNG capacity.
According to Marathon, supplies of gas from Nigeria or Cameroon will be necessary to underpin the second train (see Figure 1). However, the government – and one of the president's sons, Gabriel Mbegha Obiang Lima, is vice-minister of mines, energy and industry – now seems to be less enthusiastic about the idea of gas imports and more optimistic for the country's own supplies.
Views also differ on timing: Marathon said recently that it saw "a supply gap for LNG starting in 2016-17, which will create a window of opportunity for EG LNG Train 2", while the government would like the train to start producing in 2014.
Meanwhile, the government has been manoeuvring to increase its bargaining power in the gas industry. Although Marathon heads EG LNG – interests are Marathon, 60%, state-owned Sonagas, 25%, Mitsui, 8.5%, and Marubeni, 6.5% – and is the country's main gas producer, Germany's E.On Ruhrgas has been brought in to conduct a study of gas availability and infrastructure. The study, launched early last year, is being carried out by the so-called 3G group, made up of Sonagas, 50%, E.On Ruhrgas, 25%, Unión Fenosa, 5%, and Galp Energía, 5%, with the remaining 15% retained by the state for possible future participants.
E.On Ruhrgas said 3G is preparing a gas master-plan, covering an assessment of likely supply, the gas-gathering system needed and the evaluation of options for inland use as well as the planned LNG Train 2. Completion in the first half of this year is indicated. E.On Ruhrgas has ambitions in LNG – the company has an interest in the Netherlands' Gate regasification terminal, due to start operations at the end of 2011, and has access to import capacity in Spain.
Also involved in the country's gas utilisation plans is Gasol, a UK-registered company, affiliated to Nigerian-controlled Afren and Afgas, which describes itself as "focused on aggregating stranded gas and gas from marginal fields in the Gulf of Guinea". Gasol says Equatorial Guinea's reserves could support a new stand-alone LNG facility or a floating liquefaction project and it points out that the country is ideally located to aggregate supplies from Cameroon and Nigeria.
In December 2006, Afgas and Sonagas formed a venture, named Sonaf, to hold the exclusive rights "to monetise gas supplies" from the three countries through facilities in Equatorial Guinea, but nothing further was heard. In June 2009, however, Gasol said it had assumed Afgas' position in Sonaf and said the venture had signed an agreement to exploit gas in the Zafiro Development Area – the area encompassing the country's largest oilfield, ExxonMobil's Zafiro, and its satellites. Gasol has commissioned a study of reserves in Block B of the Zafiro area, which earlier had been estimated to total 14.2bn-21.2bn cubic metres (cm).
Zafiro's gas, at present flared, has been a point of dispute between the government and ExxonMobil for some years, with the authorities pressing for it to be landed – Zafiro is about 70 km northwest of Bioko – and threatening the company with retroactive fines. Late last year, Obiang Lima said the government planned to take the gas without payment and land it through a pipeline to be constructed by Sonagas. Obiang Lima says Zafiro accounts for 78% of the 2.1bn cm/y of gas flared in the country. ExxonMobil holds 71.25% of Zafiro, with state-owned GEPetrol having purchased the 23.75% interest originally held by Devon Energy, raising its holding to 28.75%.
The official estimate for Equatorial Guinea's gas reserves, although it is some years old, is 240bn cm for the three main producing fields – the Alba gasfield, 30 km off Bioko's northwest coast, Zafiro, and the Ceiba oilfield, lying off the African mainland part of the country. However, a considerable number of discoveries have been made in recent years, so the figure seems due for upward revision.
In particular, a new gas and condensate area is being opened-up in the Douala basin, lying east of Bioko island and extending into Cameroon waters. Noble Energy launched the first development project in the basin last year, covering its Aseng field (PE 9/09 p28). Although Aseng is being developed as a condensate field, due to flow an initial 50,000 barrels a day (b/d) with its gas cycled, in a second phase the gas will be produced and landed at Bioko. Aseng, due on stream in mid-2012, is surrounded by similar fields of which the next to be developed is expected to be Belinda, due for go-ahead next year.
There are also high hopes for the area west of Bioko and southwest of Zafiro. UK-Australian firm Ophir Energy holds Block R, where water-depths extend from 1,300 metres to an extreme 2,600 metres – but the western part of the area lies just south of the large Usan and Ukot gasfields, in Nigerian waters. Three wells drilled at the end of 2008 produced two gas discoveries, Fortuna-1 and Lykos-1.
Ophir shot an additional 1,000 square km of 3-D seismic over the finds last year and says its plans for 2010 include starting an appraisal programme of five or six wells, continuing with development studies and selecting joint-venture partners with LNG experience. A floating LNG facility is being studied. Ophir holds Block R in an 80:20 venture with GEPetrol, the state share being carried through the exploration phase.
The source of natural gas for the EG LNG facility, which has a rated capacity of 3.4m, but is producing 3.7m t/y, is the Alba field, held by Marathon with 63.3%, Noble with 33.7% and GEPetrol with 3.0%. Because LNG production has exceeded expectations and because there are other calls on Alba gas, the field is being depleted faster than expected and Marathon needs to develop satellite fields to maintain the flow.
Alba gas is also the feedstock for a large methanol plant on Bioko, operating since 2001, which uses over 1.3bn cm/y to produce 20,000 b/d of methanol. The facility is owned by Atlantic Methanol Production (Ampco), made up of Marathon, 45%, Noble, 45%, and Sonagas, 10%. About 20,000 b/d of liquefied petroleum gas is extracted from the Alba flow, in a facility owned by Marathon, 52.2%, Noble, 27.8%, and Geogam, a state-controlled marketing company, 20%. Some Alba gas is also used for electricity generation.
Oil output falters
Equatorial Guinea's oil production moved into its stride after 2000, when ExxonMobil had enhanced the facilities installed at Zafiro, and built up to a peak of 370,000 b/d in 2007. But, according to Obiang Lima late last year, production has declined to about 250,000 b/d and was expected to run at 250,000-300,000 b/d for the next few years.
ExxonMobil says Zafiro output averaged 185,000 b/d in 2008. Hess, operator and 85%-holder of the Okume and Ceiba fields, off the mainland, indicates that combined production averaged 85,000 b/d in that year, giving a country total of 270,000 b/d. In addition, Alba produces over 50,000 b/d of condensate.
It seems that the cause of the decline is faltering Zafiro output, although it is generally reckoned that Zafiro is not fully exploited because the northwestern part of the field is adjacent to the border with Nigerian waters and there have been disputes. The three Zafiro production facilities – the Serpentina floating production, storage and offloading vessel, the Zafiro Producer floating production unit and the Jade platform – tap reserves of about 400m barrels, but unofficial estimates for the area total run much higher.