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Etinde gas export project hangs in doubt

New reserve assessments and government talks will shape the Cameroon project's future

The Etinde gas export project in Cameroon was once touted as a candidate for one of the world's first floating LNG (FLNG) facilities. But, if liquids take centre stage there, its gas will likely take a different route to international markets, the chief executive of a former operator of the project tells Petroleum Economist.

The standalone FLNG option is "a less compelling proposition than it once was", says Eli Chahin, chief executive of AIM-listed producer Bowleven, Etinde's former operator, which retains a 25pc stake in the development. He hopes a final investment decision (FID) on the project will be taken by early 2020.

"Given what has been discovered to date, and the prospects of additional appraisal wells, the view is that it's going to be more of a liquids as opposed to a gas development," says Chahin, adding that the upstream partners and the government were aligned in this view.

Having overseen Etinde's early exploration phase, Bowleven farmed out a 37.5pc stake and operatorship to New Age, a privately-owned UK-based firm, in 2015, at the height of a then oil sector downturn. Russian firm Lukoil holds the other 37.5pc stake.

The company has also found gas reserves at its other main asset, the Bomono permit in the onshore extension of the Douala basin in Cameroon, where it has been sole permit holder and operator. However, its exploration licence ran out in December 2018 and the company remains in discussions with the government over its future exploitation.

Chahin joined Bowleven's board in 2017 and became chief executive soon after, following a shareholder revolt that resulted in the departure of former head Keith Hart and four other directors. The company has moved its headquarters to London from Edinburgh since Chahin's appointment.

Under his leadership, the company pledged to cut its losses and speed up returns to shareholders, prioritising the Etinde development as its best hope of doing so. In its most recent results statement, the firm announced a loss of £1.4mn ($1.8mn) in the six months to 31 December, compared to a £2.8mn loss a year earlier.

Weighing options

An Exploitation Authorisation (EA), awarded in July 2014, gives the Etinde partners development and exploitation rights over the permit for an initial 20-year period. If Cameroon's state hydrocarbons company, SNH exercises its right to 'back in' to the project, it will hold 20pc. Bowleven would retain 20pc while the other partners' stakes will drop to 30pc each for New Age and Lukoil.

New Age has long been touting a possible production start-up in 2022, and is sticking to that timeline on its website, despite previous delays to FID and a lack of certainty over the final form of the development. New Age was unavailable for comment at the time of writing.

Reserve estimates for Etinde's Miocene-aged upper, intra- and middle Isongo reservoirs have been put at around 1tn ft³ of wet gas on a P50 basis. New Age has also made a preliminary estimate that there could be 10-40mn barrels of oil equivalent in place on a P50 basis.

Tapping in: the Etinde gas project and nearby Equatorial Guinea LNG terminal Source: Petroleum Economist

However, Chahin says the latest assessment of data from wells IM-6 and IE-4, both drilled in 2018, could lead to a revision of reserve estimates, adding that the partners should have more to say on that in the early summer of 2019.

Most of the development's economic value would lie in sales of condensate and light oil resources, he says, and that the aim is now to maximise production of these. The gas will still need to be monetised either by supplying the domestic market, through exports, or both, but no one demand source is likely to be able to take all the gas produced from Etinde.

The findings of a consultants' review of the options was expected to be submitted to stakeholders at the end of April, according to Chahin. "The process then is to re-engage with the state. SNH will be an integral part of how we take this forward," he says.

Meetings with the state energy firm could take place in late May. "On the back of that we can then start doing the heavy lifting towards getting the development plan sanctioned," Chahin adds.

New direction

If a new standalone FLNG export facility does not prove viable, this would represent a significant shift in strategy for the project's developers — and one that echoes the failure to get Ophir Energy's Fortuna FLNG project in Equatorial Guinea off the ground.

Last June, New Age's local subsidiary CMLNG said it had signed a gas convention agreement with the Cameroon government that included the fiscal terms for an FLNG project. It also said a contract had been awarded to a consortium led by SBM Offshore to develop the FLNG project, as a result of a competitive tendering process launched in 2016.

Chahin says this option has not been ruled out. However, it is now one of three main export options, of which the others may prove just as — if not more — attractive to the developers, even if they come with their own challenges.

One solution would be to send Etinde's gas via pipeline to Golar's existing Hilli Episeyo FLNG vessel on the Kribi development, also in Cameroon. Kribi became the world's second — and Africa's first — operational FLNG project in March 2018. However, it is still operating at well below capacity, making it a potentially attractive source of demand for gas from Etinde.

The comparatively long distance between Kribi and Etinde — well over 100km — would add to the cost and complexity of a pipeline connection between the two. Chahin also notes that question marks remain over the capability of the Hilli Episeyo facility to process the direct, relatively rich gas feed from Etinde. But this remains one of the main options under consideration.

Pipeline to Punta Europa?

Much closer to hand is another potential recipient, the EG LNG plant at Punta Europa on Bioko Island near Equatorial Guinea's capital Malabo, just over the maritime border.

Sending gas there could be attractive to both sides, given that US independent Marathon's EG LNG facility — a 3.4mn t/yr single train project — has been on the hunt to find fresh supply to compliment that from its Alba field and help fulfill Equatorial Guinea's ambition to become a regional gas export hub.

10-40mn bl oe — preliminary Etinde estimates

However, an agreement announced in early April for EG LNG to take gas from US independent Noble Energy's Alen field in Equatorial Guinea, via a 950mn ft³/d pipeline, may have eased the pressure on Equatorial Guinea to seek gas from its neighbour in the short term.

In any case, a speedy agreement on inter-governmental gas sales between Cameroon and Equatorial Guinea is unlikely to be a straightforward process. Chahin says it could be challenging to "get an agreement put together in the timeframe that we would like".

Domestic route

Cameroon will, however, absorb some of Etinde's supply. Under its existing agreements CMLNG has an obligation to supply 70mn ft³/d of dry or lean gas to the Cameroon domestic market, according to Bowleven. The project could supply one of several proposed gas-to-power schemes being considered by the government, as well as fertiliser production, though it is unclear when any of these projects would be built.

Additionally, the Etinde consortium could commission an onshore gas processing facility to remove propane and liquefied petroleum gas fractions from the pipeline feed from the offshore facility. The propane and LPG would then be sold separately either domestically or for export.

Some of the gas could also be re-injected into the field to boost liquids yields, though that could prove a costly option, given the challenges of deploying re-injection in Etinde's high pressure/high temperature reservoirs, Chahin says.

Whatever the route out for its production, the Etinde development would be based on up to six production wells tied back into a central facility, according to Bowleven. Various options for on field processing are under discussion, depending on how the hydrocarbons produced are to be used and the extent of future discoveries.

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