BP, Partners Downsize GTA Expansion
BP has downsized the second phase of the Greater Tortue Ahmeyim (GTA) LNG project off Senegal and Mauritania in order to cut costs, its partner Kosmos Energy reported on November 9.
BP and GTA's other investors, which include Senegal's Petrosen and Mauritania's SMPHM, sanctioned the project's first phase in late 2018, with a liquefaction capacity of 2.5mn metric tons/year. First gas was expected in 2022 but was pushed back to the first half of 2023 because of the coronavirus pandemic.
Originally, the second phase was to ramp up output to 10mn mt/yr, but Kosmos said in its third-quarter results that the expansion would add only 2.5mn mt/yr, bringing the total to 5mn mt/yr. This revised capacity is "the sweet spot for leveraging all the major infrastructure from phase one," Kosmos CEO Andy Inglis said in an earnings call.
Rather than requiring a new floating production storage and offloading (FPSO) unit, the new stage will instead involve expanding the existing vessel. The expansion will also utilise spare capacity at the first-phase subsea infrastructure, and will no longer need a second gas export line from the FPSO to the hub terminal to be built.
"As a result, we believe phase two will be the most competitive brownfield LNG expansion project globally," Inglis said, "with limited upstream capital requirements expected to be less than $1bn gross to first gas." Its breakeven costs are expected to be just above $4/mn Btu for Asian sales and under that for European ones, thanks to the reduced costs.
The group aims to take a final investment decision on the expansion in 2022. Kosmos said it expected to cover its share of the second-stage costs fully with cash flow from the first one. But it still faces $725mn in capital expenses between 2021 and 2023 to pay for the first stage. Kosmos swung to a $36.5mn pre-tax loss in the three months ending September 30, versus a $39.5mn profit a year earlier, on the back of a 37% slide in revenues caused by weaker prices and a drop in production.
Inglis told investors that the company had secured a "financing path" to cover phase-one costs, ensuring that it will retain its share in the project and earn a sevenfold return on investment. It is in talks with BP to sell the FPSO to an off-balance sheet, special purpose vehicle (SPV) for the back cost paid so far, or around $160mn net to Kosmos, he said, noting that the deal was expected to close in the first quarter of 2021.
The SPV will also pay for all future obligations relating to the FPSO, freeing Kosmos of a further $160mn in expenses. In addition, the company intends to refinance a loan next year to obtain an extra $100mn. These steps will fully cover the company's GTA expenses in 2021, and it hopes to pay for the remaining $300mn due in 2022 and 2023 with direct investment in Mauritania and Senegal, which it expects to secure by mid-2021.