Iran Prepares to Export LNG
National Iranian Oil Company (NIOC) and Norwegian Hemla have formed a joint venture IFLNG to export 0.5mn mt/yr LNG for 20 years, NIOC’s official website reported October 26.
According to the report, the joint venture unites the Hemla and Kharg petrochemical company (KPC). It will lease Exmar’s Caribbean FLNG by next summer and it will then receive 2.3mn m³/d gas from the seventh South Pars gas field processing plant.
Hemla and Iran have been in talks since 2016 and the sides had hoped to finalise the contract in late 2016. An oil ministry source told NGW October 11 – when NIOC CEO Ali Kardor said that the first FLNG contract was imminent – that the gas price was the main obstacle. But eventually the oil minister Bijan Zanganeh decided on the gas price formula October 4. This formula is applied for LNG projects, below 1.5mn mt/yr capacity, he said, and will remain in force until 2035.
According to official website of NIOC, the gas price payable to the local producer is a netback based on the cost of freight and the Japan Korea Marker. The JKM is a spot LNG assessment published daily by Platts.
Neither Hemla nor NIOC commented on the project's value, but initially they were in talks over a $600mn contract. However, that contract included the gathering of associated gas in Kharg region, not refined gas from South Pars.
Hemla did not respond to NGW’s questions, but it had already reported on its website in May 2016 that “Hemla will secure debt financing and will be 50/50 equity partners with KPC/KGRC [the two are sister comanies],” said Gerhard Ludvigsen, a founding member of Hemla group and director of Hemla Vantage.
He added that the joint venture will purchase 200mn f³/d of associated gas from offshore oilfields near Kharg Island over a period of up to 15 years. “In its first phase, the site is projected to produce 500,000 metric tons (mt) of LNG and 200,000 mt of LPG/year. The FLNG barge, produced in China and ready to be shipped to reach Kharg Island by October, will be leased from Exmar, a Belgian company.”
Iranian sources declined to comment.
According to Exmar, Caribbean FLNG will drastically reduce time-to-market by providing floating liquefaction and storage in a cost-efficient and flexible way to gas fields located onshore and offshore, eliminating the need for large infrastructure on land.
Hemla was set up in Oslo in 2009 to allow national oil companies ways to take operational control of sovereign resources without partnering an international oil company. It says the "model is politically neutral, harvesting from the Norwegian offshore expertise which allows financing models that maximise local ownership and operational content."
Dalga Khatinoglu