358

With the Golar Hilli Episeyo arriving offshore Cameroon for Perenco, floating LNG is about to become a reality in Africa. The technology dramatically reduces the cost of liquefying gas, making previously unviable fields commercial, and is part of a new wave of enthusiasm for gas sweeping the continent, writes Thalia Griffiths

The Golar Hilli Episeyo has arrived offshore Cameroon, ready to start production from gas fields offshore Kribi port. The Hilli Episeyo, which left the Keppel shipyard in Singapore on 1 October, has an eight-year contract with Perenco and Société Nationale des Hydrocarbures (AE 355/16). The world’s first converted floating liquefaction vessel was converted from a Moss LNG carrier built in 1975 with a storage capacity of 125,000m3, and has a liquefaction capacity of about 2.4m t/yr of LNG.

The Cameroon project is expected to be followed by Ophir’s Fortuna project offshore Equatorial Guinea, where a final investment decision (FID) is expected in Q1 2018 (AE 356/15). The innovative project, in deeper water than the Kribi fields, will benefit from having the same team of engineers as the Hilli, which will help to maximise the operating efficiency of the project. Ophir is considering a second FLNG vessel on the Fortuna development.

Despite promising signs from major finds by Italy’s Eni off Egypt and Mozambique, most of Africa’s bigger LNG developments are moving slowly as they struggle with familiar issues of infrastructure, pricing and policy. However, smaller projects are proving more nimble. Floating LNG (FLNG) has the potential to make the development of previously stranded gas economically viable, and with growing domestic and international demand for gas it is a potential game-changer (AE 345/22).

Equatorial Guinea is looking at a second FLNG hub as a development option for Noble Energy’s blocks O and I. Further FLNG developments are planned for the Coral South field offshore Mozambique, which reached financial close on 22 November, the Tortue field shared by Mauritania and Senegal, and for New Age (African Global Energy) in Republic of Congo and on the Etinde field offshore Cameroon.

The potential importance of Africa’s gas to world energy markets was highlighted in the past year with BP buying the whole cargo of Eni’s Coral South development in Mozambique (AE 332/13), then farming into Kosmos Energy’s assets offshore Mauritania and Senegal to participate in the Tortue development. At the same time, ExxonMobil has taken a 25% stake in Eni’s Mozambique Area 4, while Total on 8 November announced an agreement with Engie to acquire its global portfolio of upstream LNG assets for $1.49bn, giving it access to 10% of the global market, which will place it second to Royal Dutch Shell. The assets include a 5% equity stake in the first train of the Idku LNG project in Egypt, as well as gas supply from Algeria.

Paradigm shift

“We are in the midst of a literal paradigm shift where something that starts at the fringe makes its way to the centre and becomes the core. Gas is the new oil,” Monetizing Gas Africa chief executive Rodney MacAlister told ITE’s Africa Upstream conference on 26 October. Oil production may have peaked in Africa; the BP Statistical Review shows it declining from a 2007 peak of 10.3m b/d to 7.9m b/d in 2016, while gas has been increasing. Its proponents argue that gas is the only fossil fuel whose share of the energy mix is set to increase, replacing coal, and to a lesser extent oil. The majors, particularly Eni, BP and Total, are adapting by increasing the share of gas in their portfolios.

Even Namibia’s offshore Kudu field, whose development has been considered by successive operators for decades, is set for FID by year-end or in Q1 2018, according to National Petroleum Corporation of Namibia (Namcor) managing director Immanuel Mulunga (AE 357/17). It is now in the hands of Norway’s BW Offshore, which will reduce costs by supplying one of its own vessels as a floating production unit (AE 340/1).

Development of Mozambique’s vast offshore gas reserves in the Rovuma Basin is making slow progress, although Anadarko Petroleum Corporation and its partners have completed the foundational legal and contractual framework for the onshore LNG project. “Only a few formal government approvals remain before commencement of resettlement and site preparation activities, which will position the onshore area for construction of the LNG facilities,” the company said in its Q3 2017 operations report. Anadarko and its co-venturers in Area 1 have reached agreement on the project’s first long-term sales and purchase agreement for 2.6m t/yr with Thailand’s PTT.

Before the onshore development goes ahead, Eni plans a floating LNG development for the Coral field in Area 4, where ENH vice-president for administration and finance Jahir Adamo told Africa Upstream he expected financial close “in a few weeks”. The development is expected to have a capacity of 3m t/yr, and six production wells will be drilled from 2019. FID was reached in June 2017 (AE 348/16).

Cabinet is expected to approve the development plan for Area 1 “in a period of months”, Adamo said. The first phase will have two 6m t/yr LNG trains at a site on the Afungi peninsula in Cabo Delgado province. Three domestic projects announced in January to produce fertilisers, power and liquid fuels will be supplied with gas from Area 1. Few details of the projects have been announced but they are likely to take some time to develop (AE 349/1).

“It is estimated that 400mcf/d are going to be delivered to the domestic market, which puts us in a very challenging position to develop the market. This initial stage is to create an industrial cluster. In the first phase we have already awarded three projects that in principle will consume all the quantity that is allocated to the domestic market,” Adamo said.

Further south, Sasol is developing more gas at Temane for a 400MW gas-to-power plant. Adamo said an LPG plant and condensate monetisation options were being considered for the area. And talks are continuing on contracts for five new exploration concessions awarded in October 2015 (AE 311/16).

Domestic demand

Smaller projects meeting domestic demand are making progress in several countries, notably Cameroon and Tanzania. Victoria Oil & Gas (VOG), which supplies gas to industrial clients in the Douala area of Cameroon, raised $23.5m with a share placing on 25 October to fund further development. “Utilising funds from equity investment, alongside reinvested cashflow and debt, VOG intends to significantly increase the reserves available for gas supply and reduce costs through the development of new fields, such as Matanda and Bomono,” chief executive Ahmet Dik said in a statement. “The completion of this process will allow the company to take a significant step towards achieving our production expansion goal of 100mcf/d by 2021.”

Nigeria has drawn up a new National Gas Policy, but infrastructure and financing constraints remain an industry headache, both for domestic power plants starved of gas and for disappointed customers of the West African Gas Pipeline (AE 351/1). Indigenous companies are keen to pick up the slack where the majors are pulling back, and Savannah Petroleum’s planned acquisition of Seven Energy’s assets is a promising sign.

While Tanzania’s big LNG development is making very slow progress, Canada’s Wentworth Resources is exporting gas through a new Chinese-built pipeline from Mtwara to Dar es Salaam for use in industry and power generation, and says that payments are now being made regularly despite problems with arrears. The UK’s Aminex is also producing gas into the pipeline and has plans to develop more reserves.

In its latest results, Wentworth said production from Mnazi Bay supplying the Kinyerezi-1 and Ubungo-II power plants averaged 60mcf/d in Q3 17 and reached over 70mcf/d in October. Wentworth calculates that demand from the 240MW Kinyerezi-2 power plant and the Dangote Cement plant should add 10-12mcf/d of gas at start-up in the next two to four months, increasing to around 60mcf/d when the facilities become fully operational in H2 2018.

In Morocco, SDX Energy has embarked on a drilling programme with the aim of increasing local gas sales volumes by up to 50% in 2018, while Sound Energy is expanding production in western Morocco and exploring for gas in the east of the country.

LNG import business emerges

LNG imports are up and running in Egypt and planned for several countries including Côte d’Ivoire, Ghana and South Africa as planners across the continent rethink their energy supply strategies.

In Côte d’Ivoire, a Total-led consortium is developing an LNG import project, with a floating storage and regasification unit to be moored in the lagoon at Abidjan (AE 336/14). The location is naturally protected, meaning there is no need for infrastructure such as a protective breakwater, and it is cheaper than building an onshore terminal. Côte d’Ivoire is keen to expand its domestic power generation capacity and maintain its status as a significant exporter to neighbouring states (AE 354/9).

Ghana has three separate planned LNG import schemes. But Africa Upstream participants highlighted a lack of regional co-operation as a key issue, with West African states planning multiple floating storage and regasification unit (FSRU) developments rather than cooperating to develop one large resource and export power via a regional power pool. “Gas will remain stranded unless willing mainstream investors come along to take it from the source to a use,” MacAlister said.

While Mozambique and Tanzania’s offshore gas is destined for export, Eni’s giant Zohr field, due on stream by year-end, is expected to replace LNG imports handled by two FSRUs at Ain Sokhna port. Energy minister Tariq Al-Molla has said one of the FSRUs will be shut down as early as 2018. Zohr’s production will eventually reach 1.2bcf/d, the equivalent to about one-fifth of current Egyptian production. BP started production in May from the Taurus and Libra fields in the West Nile Delta development, which will produce 1.5bcf/d in 2019, and other gas fields, onshore and offshore, are also in development.