All eyes on Cameroon's first FLNG project
Success for Golar's facility could ease the way for further developments off Africa’s coasts
Ambitions within West Africa to exploit pioneering floating liquefied natural gas (FLNG) technology to boost gas exports has entered a crucial phase, following the start-up of the Kribi project in Cameroon.
Golar LNG confirmed in mid-March that its Hilli Episeyo FLNG facility had begun producing from the Kribi development, located in relatively calm waters off southern Cameroon and operated by French firm Perenco. Testing was expected to be completed during April, paving the way for production to ramp up towards the facility's 1.2m-tonnes-a-year capacity—though a timetable for exports to start up hasn't been released.
All of the project's output is to be sold to Gazprom Marketing and Trading for eight years under an agreement signed in 2015, based on 500bn cubic feet of gas from the Sanaga Sud and Ebome fields. The Hilli Episeyo will also produce 5,000 barrels a day of condensate for Cameroon's domestic market.
Kribi is the world's second FLNG project to start production, but it's the first to produce from a converted LNG carrier. Petronas' existing PFLNG Satu facility, operating off Malaysia, was purpose-built, as was Shell's giant Prelude facility, which is due to start operating off Western Australia later this year.
Using a conversion offers a cheaper way to produce FLNG. The precise cost of Hilli Episeyo isn't known, but if industry estimates of a price tag of around $1.2bn are correct, that would represent a cost of $1bn per million t/y of LNG capacity. By contrast, PFLNG Satu, which has a similar production capacity to Hilli Episeyo-though it has been operating well below that level-is estimated to have cost as much as $10bn. Based on Shell's data, Prelude, the world's largest floating structure with a capacity of 3.6m t/y, has cost more than $12bn, or more than $3bn per million t/y of capacity.
In parts of Africa where attracting investment can be a challenge, lower costs would be a boon. Golar's next FLNG conversion, based on the Golar Gandria LNG carrier, is now being adapted at the Keppel shipyard in Singapore, and is destined for Ophir Energy's proposed Fortuna FLNG project in Equatorial Guinea—if Ophir can sort out the financing.
In parts of Africa where attracting investment can be a challenge, lower costs would be a boon
Ophir had originally been in negotiations over funding with a group of Chinese banks; but when those talks collapsed, it turned to another as-yet-unnamed Asian lender to raise $1.2bn as partial funding for the 2.2m-t/y project, which Ophir hopes to start up by end-2021. However, the deal had yet to be signed by early April.
Ophir's chief executive Nick Cooper said in a call with analysts in March that it was difficult to predict when project financing would be complete. He noted that it was very rare for a small company to seek such a large tranche of project financing, but said the economics remained attractive.
That Golar is pushing ahead with the Gandria conversion indicates some confidence that a funding deal can be signed off. Not only is Golar behind the conversion, it also has a stake in the Fortuna project itself through OneLNG, its joint venture with Schlumberger.
Two other similar projects are tentatively planned for West Africa by NewAge, a privately-held developer registered in Jersey and with headquarters in London. For the Etinde project off Cameroon, the firm and its partners, Lukoil and Bowleven, hope to use FLNG to exploit gas reserves of over 1 trillion cf, possibly taking a final investment decision in 2019.
NewAge also hopes to develop FLNG production from some 8 trillion cf of reserves in the Marine XII licence off Congo-Brazzaville, which were originally discovered by Eni. The company has been assessing leasing arrangements for FLNG facilities of more than 1m t/y capacity that could be built in Chinese shipyards.