Eni Flags Coral Gas Approval, But FID is still Pending
Italy’s Eni announced on February 24 that the plan of development for the Coral discovery, offshore Mozambique, has been approved by the Mozambican council of ministers. The approval relates to the first phase of development of 5 trillion ft3 (141.6bn m3). But operator Eni said it has yet to take the final investment decision (FID) on a related LNG export project.
“Today’s approval of the Coral Plan of Development is a historical milestone for the development of our discovery of 85 trillion ft3 of gas in the Rovuma Basin,” said Eni chief executive Claudio Descalzi, ahead of the company’s full year 2015 results on February 26. He called the plan's approval a “fundamental step to progress toward the final investment decision” of Eni’s envisaged Coral floating LNG project, but its statement did not say when that would be taken or the expected cost.
Early last year Eni declared that it would take FID during third quarter 2015 but later postponed that decision first until late 2015 and then into this year, largely because the slide in global LNG prices – caused by a worldwide oversupply of LNG exacerbated by weaker Chinese demand -- undermined the economics of all new LNG export ventures. Spot Asian LNG prices, which opened 2015 at about $10/mn Btu, are now less than $5/mn Btu and trending lower. Many experts expect the global LNG glut to last until 2022-2025.
The Eni-led Coral floating LNG (FLNG) plant, if built, would be the first in East Africa and among the first in the world. However similar projects offshore Cameroon, Indonesia and Australia – the latter, Prelude, led by Royal Dutch Shell – are already under development, and one in Equatorial Guinea is eying FID later this year. Eni sees itself as a challenger to Shell in the field of FLNG technology and project development.
The Coral Plan of Development, the first to be approved in Mozambique's offshore Rovuma Basin, foresees the drilling and completion of six subsea wells and the construction and installation of a technologically advanced state-of-the-art floating LNG facility, with export capacity of around 3.4 million metric tons/yr (4.7bn m³/yr). That’s much larger than the 2.5mn mt/yr capacity originally discussed by Eni, and closer to the size of Shell’s own Prelude FLNG project now being built offshore Australia. Prelude FLNG is expected to produce 3.6mn mt/yr of LNG, 1.3mn mt/yr condensate and 0.4mn mt/yr of LPG for export and is unofficially estimated to cost some $12bn.
Last October it was reported that BP would be a major LNG offtaker from Coral FLNG if developed, but no firm sales deal between the two has yet been disclosed.
Eni said the government approval relates to the first 5 trillion ft3 development of its Coral gas discovery in the Area 4 permit, in water more than 2000 meters deep and some 80 km offshore of the Palma bay in the northern province of Cabo Delgado. The giant discovery, made in May 2012 and outlined in 2013, is estimated to contain around 16 trillion ft3 of gas in place, wholly located in Area 4. This in turn is part of 85 trillion ft3 of gas discovered by Eni in the wider Rovuma Basin offshore Mozambique.
Eni is operator of Area 4 with a 50% indirect interest, owned through Eni East Africa (EEA), which holds a 70% stake of Area 4. Other concessionaires – each with a 10% stake -- are Portugal’s Galp Energia, South Korean state-owned Korea Gas Corporation (Kogas) and Mozambique’s state-owned Empresa Nacional de Hidrocarbonetos (ENH). Chinese state CNPC has a 20% indirect interest in Area 4 through Eni East Africa.
Eni and its partners are separately seeking to develop the important Mamba gas discovery, which allowed in December 2015 the achievement of a unitisation agreement with Area 1.