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    [NGW Magazine] Deadline Looms for Fortuna


Equatorial Guinea has warned that unless Ophir takes FID on its Fortuna floating LNG venture by year-end, it may lose operatorship or have the project scrapped, reports this article, from Vol.3, Issue 9 of NGW Magazine first published May 14 2018.

by: Mark Smedley

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[NGW Magazine] Deadline Looms for Fortuna

Equatorial Guinea has said that unless Ophir Energy takes a final investment decision (FID) this year on its Fortuna floating LNG venture, it may lose operatorship or the project may be scrapped.

The country’s mines and hydrocarbons minister Gabriel Obiang Lima told a press briefing May 10: “Ophir is the one that is leading this. As the ministry, we are supporting Ophir and their partners. But we are conscious that time has its limits… This year is definitely the last year.”

Obiang Lima told the briefing he believes FID is “very close. It’s up to the operator to decide on options. But it needs to be done as soon as possible, because at the end of the term, we need to think about the alternative.”

On several occasion Ophir has deferred its target FID from originally mid-2016 to now end-2018, as it struggled to assemble financing – with some Chinese banks reportedly insisting on Chinese content, which conflicts with Ophir and partner OneLNG’s own plans for the project.

Now though Obiang Lima says a further deferral is not on the table. Asked if a replacement operator might be found, he said: “That’s an option. There are other alternatives. We are confident it will do it, but we do have a responsibility to not just sit on the block.”

Ophir and partners had taken the risk and discovered the gas, the minister said, expressing confidence FID was “almost done” but stressed that the government had rights under the contract to examine alternatives in order to “protect the resource.”

The minister spoke at length about various options being explored to pipe more offshore gas to the country’s onshore gas processing hub at Punta Europa, to keep running a methanol plant and to maintain or expand capacity at the onshore EGLNG complex. He did so earlier on May 10 in the course of an opening speech to the Africa Oil & Power conference in London.

Ophir Energy CEO Nick Cooper later addressed the same event, pinning hopes on taking FID later this year, for the single-ship 2.5mn to 2.8mn mt/yr Fortuna FLNG venture, which is now targeting first gas in 2022 rather than its original target of 2019.

The FLNG venture has a capital cost of $2.1bn, said Cooper, of which $650mn had been spent already, chiefly on the liquefaction ship.

The project and ship’s low-risk “relatively simplistic design” using proven Black & Veatch liquefaction technology was a “positive factor” that had helped lock in a low breakeven price of $5/mn Btu free-on-board, or $6/mn delivered into Europe. Roughly $0.5bn of the project cost was upstream, with about $1.5bn of capex on the ship.

Cooper however did not stay to answer questions from his investor audience, so insights on why it had struggled to raise finance came during an earlier panel at the event.

Ophir’s Africa and global new ventures director Olivier Quinn said that the benign conditions in the Gulf of Guinea meant it plans to convert an oil production ship (FPSO) into an FLNG vessel, thus keeping costs down. So the project has an “incredibly low-unit cost. There’s significant interest in the offtake. The midstream and upstream are ready. The challenge is financing the project. We’ve said this publicly before: we’ve probably been guilty of being optimistic on timing,” said Quinn.

“It’s complex. There are ten or twelve key stakeholders in this value chain. All have to come to alignment on the structuring of that project financing – and that takes time.”

Quinn said it was probably Ophir’s fault for expecting financiers to be so confident, and that its task now was to “close the gap in perceptions” between its own and financiers’ perception of the upstream/midstream risk.

Everyone who looks at the project, concluded Quinn, appreciates its value and scale, including the possibility of expanding it with the addition of a second liquefaction vessel.