Shell Must Compete for LNG: Equaguinea
Shell will need to compete against a wide range of competitors when its offtake from Equatorial Guinea LNG comes up for renewal in 2024, the country's energy minister said May 10 in London.
Among the jewels in the crown, acquired by Shell in its 2016 acquisition of BG, was a 17-year contract to offtake 3.4mn mt/yr from the onshore EG LNG venture at Punta Europa. The contract was one of the most lucrative ever signed, particularly in 2013 when BG was able to sell into Japan at close to $20/mn Btu cargoes that it was offtaking from Equatorial Guinea at its long-term price then of some $3/mn Btu.
Equatorial Guinea's minister of mines and hydrocarbons, Gabriel Obiang Lima said that, possibly as soon as 2020, extra gas from firms such as Noble Energy arriving through infrastructure co-owned by Marathon Oil will be "backfilling" facilities at its Punta Europa gas processing hub on Bioko Island, which includes not only methanol and LPG plants, but also the 3.7mn mt/yr EG LNG venture (60%-owned by Marathon, with EG state-owned Sonagas 25%, and Japanese firms Mitsui 8.5% and Marubeni 6.5%).
"We’re inviting different international oil companies and possible offtakers to know that this option of this option of backfilling is there. It’s going to be quick, 2020, we’re talking being able to supply LNG there. It could be additional LNG, because we have additional fields....When 2020 arrives, we will have additional gas. We want to be clear; it’s a business. As a business, who pays better will get the product," Obiang Lima told a press briefing on the fringes of the Africa Oil & Power conference, when asked by NGW about talks on possible successors to the Shell offtake which comes to term in 2024.
"That will be an open opportunity – it’s not going to be anymore [just] for Shell, but for anybody. If Shell brings something to the table, then we could be happy to work with them again."
The minister also told Reuters exclusively that talks had begun with named Asian, European and at least one Russian company interested in offtaking from EG LNG in future, and that royalties on any future deals would need to be improved.
Such is the clamour that another Asia-Pacific company at the event, not named by Reuters, told NGW on condition of anonymity that it had also begun talks on a possible future EG LNG offtake deal.
Margins on the EG LNG offtake are no longer as lucrative as they were in 2013. Nonetheless, in a sign of Shell's determination to retain at least part of that offtake beyond 2024, three Shell executives – including its EG-based country representative – awaited Obiang Lima as he stepped off the podium at the end of the conference.
Shell signed memos of understanding mid-2016 and again April 2018, the former including a pledge to present a 'master gas plan' for the country but little has since been disclosed.