A string of new LNG projects in Australia, North America and Russia promise a growing surplus of LNG on international markets, making the timing of new Sub-Saharan African LNG projects difficult.
Move too early and the offtake agreements will not be generous, with new projects feeding into an already oversupplied market.
Move too late and projects could miss the hoped-for next wave of LNG development, one that is heavily dependent on future gas demand growth.
The international market has strengthened in recent months. Asian spot LNG prices reached $9.75/MMBtu in early January, up from a low of $4.0/MMBtu last April, but are still half the $20/MMBtu seen in February 2014. A continued recovery could be sufficient to see schemes sanctioned, but there is no guarantee these price levels will be sustained. In 2015, global gas demand grew by only 1.7%.
The only operational plants in Sub-Sahara Africa at present are the Nigeria LNG scheme on Bonny Island, Angola LNG and EG LNG in Equatorial Guinea. Despite plentiful reserves in some countries and limited local demand, no other trains have been given the go-ahead. Yet there has never been more projects under consideration.
A dozen new schemes have been mooted at different times in Nigeria. The country had, at end-2015, 5.1 Tcm of proved gas reserves in contrast to Australia’s 3.5 Tcm, but the investment regime and security concerns continue to act as a deterrent. Local reports suggest the Olokola LNG scheme may now be cancelled, while decisions on Train 7 at NLNG have been repeatedly delayed. US major ConocoPhillips has withdrawn from the Brass LNG project; its future is being debated this month by the remaining shareholders, Nigerian National Petroleum Corp., Eni and Total.
A key problem is that successive governments have wanted International Oil Companies to develop new LNG plants as joint ventures with NNPC, which has been unable to fund its share of costs.
Discoveries offshore Tanzania and Mozambique have collectively yielded 6.7 Tcm of natural gas over the past decade, but to date no LNG project has been sanctioned because of low international prices and government inaction.
The Mozambique government’s credit worthiness has been hit by a recent loan scandal and this may have triggered its decision finally to pass the legislation required to develop LNG projects in the north of the country, in the process relinquishing the receipt in kind of its quota of available gas.
Elsewhere, the UK’s Ophir Energy is considering moving ahead with the Golar floating LNG project in Equatorial Guinea, which will have production capacity of 2.2 million mt/year.
Yet the gas available continues to grow. In December, BP agreed to invest $936 million in Kosmos Energy’s Greater Tortue project offshore Mauritania and Senegal. It is estimated that the acreage in question contains about 1.4 Tcm. Given the limited local market, LNG is the obvious option, but again project sanction, mooted for 2018, is unlikely to come quickly. Project development times suggest Africa’s LNG potential may not be realized until the mid-2020s.
By Dr Neil Alexander Ford
Source: OilVoice Press
LinkedIn Twitter Xing EmailWhen I left my second large company experience to become President of a small manufacturing company I did so driven by ego; I fancied the title. Soon […]
LinkedIn Twitter Xing EmailFirm details on exactly how the U.K. will regulate new medicines is still to be decided after it leaves the EU later this year (caveats on timing […]
LinkedIn Twitter Xing EmailThe Simply Good Foods Company, the owner of Atkins-branded food products, has secured a deal to acquire protein snack maker Quest Nutrition for $1 billion. Quest, which […]