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    Africa's LNG Export Projects [NGW Magazine]

Summary

Floating LNG (FLNG) is demonstrating its appeal for companies to secure early production from offshore African resources but, in the longer run, scaling up in the continent will rely on traditional onshore plants. [NGW Magazine Volume 4, Issue 11]

by: Ed Reed

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Africa's LNG Export Projects [NGW Magazine]

The latest gas province being unlocked through the use of FLNG is Mauritania-Senegal, where BP and Kosmos Energy took FID in December 2018. This builds on success in Cameroon, for Perenco, and work under way in Mozambique, where Eni is building the Coral South plant.

Tortue LNG

Putting the gas resource in Mauritania-Senegal at around 40 trillion ft³, BP’s vice president for African exploration, Jasper Peijs, told the Africa E&P Summit in London mid-May that he felt “very confident about the presence of a quality gas resource in Mauritania and Senegal.”

The basin-opening discovery was announced in January 2016 by Kosmos, saying it had found 101 metres of net pay in two reservoirs. BP struck a deal with the US-based company – managed by former BP upstream executive ~Andy Inglis – at the end of that year and it now holds a 61% stake in the cross-border Tortue plan.

“The news that we had discovered gas there was not met with jubilant praise,” Kosmos Energy’s chief exploration officer, Tracey Henderson, said. Since that time, FLNG projects have made progress and the industry is coming round to the idea. “We announced in March, at our Capital Markets Day, that we were planning to sell down some of our equity in the Tortue project. We want to stay in it but we want to reduce our involvement to a level that’s sustainable.”

More drilling is planned for this year. Beyond Tortue, BP’s Peijs noted the presence of Yakaar, to the south, in Senegal. An appraisal well is planned in this area later this year. “In Mauritania, some gas has been found and we’re going to drill a big exploration well, Orca [in the second half of the year]. When that comes in, there will be another resource almost the same size as Tortue. This is a serious opportunity, and it will require a serious amount of capital investment. It does provide an opportunity for a design-one, build-many strategy.”

FLNG will serve to bring this gas resource “online quickly and efficiently. You want something that’s modular. That’s why this will be the fastest LNG development in history – if it manages to deliver first gas by 2022.” Production in the deepwater will be moved to an FPSO, in shallower waters, off Mauritania and Senegal, which will carry out initial processing. Gas will then be exported to a near-shore FLNG hub, protected by a breakwater.

Sanction of the Tortue LNG scheme was reached just two years after discovery and it will be the deepest gas development in the world. Also due to start producing in 2022, is Eni’s FLNG scheme in Mozambique. The Cameroon project began producing in March 2018.

Up next

Assuming success at Tortue LNG, options are open as to what may come next. “I think after that [first phase], now that you’ve got part of the infrastructure in place, you can look at what makes best economic sense. And that may mean more FLNG or it may be a different development technique,” said Peijs.

The first phase for Tortue LNG will have 2.5mn metric tons (mt)/yr of capacity, but there is clear scope for expansion. Kosmos Energy, at its capital markets Day earlier this year, identified three potential hubs, each of which might produce 10mn mt/yr.

One factor driving decisions on how facilities in Mauritania and Senegal will be built comes from climate change considerations. These two countries want to reduce emissions by 22%. An LNG plant – or number of LNG plants – will have a bearing on these plans.

“Do we choose regular gas turbines, or combined-cycle ones onshore, that’s a 17% reduction [in emissions]. Whether we use solar panels or our own fuel gas, we have choices there,” Peijs said.

As demonstration of the companies’ determination to expand the Mauritania-Senegal gas plans, KBR was awarded pre-front-end engineering and design (Feed) work on Phases 2 and 3, in April. This work would examine expansion at Tortue, with additional gas being linked in to the nearshore FLNG facilities. The service company won further work, on facilities integration for Phase 1, in early May.

Success in Cameroon has set the stage for a number of companies and governments to consider FLNG.

New Age (African Global Energy) is working on a number of potential projects, including in Cameroon and Congo Brazzaville. Furthermore, there has been some speculation that gas discoveries in Gabon’s pre-salt could also be developed through FLNG.

Making good progress, but flying largely under the radar, Poly GCL is expected to approve its Ethiopia-Djibouti plan in the not-too-distant future. This will use a floating facility to export gas from the onshore Ogaden Basin to China.

Not all plans will go ahead, though. Equatorial Guinea had been holding talks with Ophir Energy on an FLNG plan for the Fortuna gas field. The company was unable to confirm financing and it ran out of time, with its licence expiring at the end of 2018. Block R, which holds Fortuna, has been renamed as EG-27, and is up for grabs in a licence round, which is due to close on September 27.

In the near term, Malabo’s focus has switched to backfill work on the Alen field, which Noble Energy announced in April it would link to liquefaction capacity at Bioko Island.

Paving the way

The appeal of FLNG, as Peijs noted, was that production can start – and revenues flow – in relatively short order. There are problems for expansion, though. Putting liquefaction trains on vessels puts a hard limit on expansion and unit costs are higher than for onshore facilities.

For large-scale plans, therefore, the industry will continue to look onshore. Developments in Mozambique bear this out. While Eni is working on its floating 3.3mn mt/yr Coral South plan, the focus for partners behind Areas 1 and 4 is onshore.

Anadarko Petroleum has been working on the Mozambique LNG project for some time and an FID for the two train, 12.88mn mt/yr facility has been signposted for June. The US company is in the process of being sold to Occidental Petroleum, and the African assets being sold on to Total, but this is unlikely to have an impact on the liquefaction plan.

In parallel with Mozambique LNG is Rovuma LNG, which will be built in the same Afungi LNG Park. This second plan will be led by US major ExxonMobil and involve two trains, with 15.2mn mt/yr of total capacity. In mid-May, the Mozambique government was announced to have approved the development plan, with an FID planned for later this year.

Anadarko and its partners on Area 1 have struck a number of sale and purchase agreements (SPAs) for production from Mozambique LNG. ExxonMobil has said that SPAs covering all production from Rovuma LNG’s trains have also been signed. In October 2016, BP signed up to take all of the LNG from the Coral South project, said to be on relatively cheap terms as the technology is uncertain and so allowing Coral some flexibility in supply.

Tanzania was once considered to be a rival of Mozambique in terms of gas export plans. However, talks with Dodoma are progressing slowly and companies have pushed back expectations for production to start.

Idle capacity in Egypt offers a low-cost option for additional exports. With domestic demand growing, this may come under pressure once more, if Cairo cannot secure volumes from other east Mediterranean suppliers, such as Cyprus and Israel.

Nigeria is also working on plans for a seventh train at its Bonny Island terminal, which would increase output to 30mn mt/yr, from 22mn mt/yr. This plan has taken considerable time though. Feed work on Train 7 was dished out in 2007 but little progress made. In mid-2018, a dual Feed contract was given to two competing consortia, with much talk that 2019 would mark an investment decision. With a number of questions lingering over investment plans in Nigeria, and Anglo-Dutch major Shell engaged in contract discussions with the government, more delays should be expected.

Drive and competition

As Henderson noted, appetite for energy is changing. This is driven by increased appetite for gas – in its various forms – and the rise of FLNG for at least early-stage exploitation. “There’s a reason BP is pushing into gas as it is and I think there’s a transition under way,” the Kosmos official said. “Everyone in the industry can see peak demand for oil before peak demand for gas. A lot of people are starting to feel a shift – and we’re off to a head start on that.”

African LNG production could double, BP’s Peijs said, although with various caveats to bear in mind. These include the investment climate, while softening in the Asian prices may take its toll on east African plans.

The question of African competitiveness loomed large over the Africa E&P Summit. While there have been improvements in some parts of the continent in recent years – Egypt and Angola, for instance – other locales, such as Tanzania, remain tougher. Those companies large enough to advance liquefaction plans in Africa are not restricted by geographical limitations.

For BP, at least, the global benchmark to beat is US exports. The Mauritania-Senegal plan “clearly competes” on these grounds, Peijs said. This region is set to provide a key test for FLNG and its ability to scale up.