Coral FLNG "Very Viable" Thanks to Cost Savings - Eni
Eni’s head of upstream developments says “very significant cost savings” have been achieved in engineering designs for the Coral floating LNG project, off Mozambique.
Coral FLNG could be developed at a cost of $1.3b per mn metric tons/yr installed, said Roberto Casula, who has overall responsibility for the project, in London on March 18 adding: “That’s comparable to many onshore projects.”
Casula said the three major consortia that have bid for the engineering, procurement and construction (EPC) said they could increase Coral FLNG’s production capacity from the initial 2.5mn to 3.4mn tons/yr. “This project is technically very viable,” said Casula. “It’s pure methane, so very low liquid or pollutant content, so very simple to process."
Speaking earlier at the same Eni 2016-19 strategy presentation in London, CEO Claudio Descalzi said that a final investment decision (FID) for Coral FLNG is still planned this year “hopefully by June”. He added that 2017 remains the target for FID on phase 1 of the separate onshore Mamba LNG, also tapping offshore gas from the same Eni-operated Area 4 offshore Mozambique but a different field. Phase 1 of Mamba LNG envisages two trains each of 5mn tons/yr.
Casula said the reduction in expected Coral FLNG capital expenditure had been “possible, thanks to engineering efforts on the one side, and tendering efforts on the other.” The latter means persuading contractors to reduce their bid prices. He did not give an overall project cost, but on the basis of a 3.4mn t/yr scheme, this might would work out at about $4.5bn
Descalzi was also asked if Eni would take an FID on Mamba while still retaining its overall 50% interest in Mamba/Area 4. “In Mozambique, 50% is too much. So we are working [to divest]," he replied. He said his hope is that commercial negotiations would be concluded in 2016, although it was unclear if this related to LNG sales – also not yet finalised, though with BP unofficially mooted – or a farm-down in Area 4 equity.
On the fringes of the Eni event in London, Natural Gas Africa asked if domestic gas projects and a previously mentioned 40,000 b/d Gas-To-Liquids project might also figure as part of the initial phase-1 Mamba LNG development, or instead be trimmed out in order to achieve capex savings for the project.
Speaking on the understanding that he does not head up Mozambique, Eni’s midstream gas supremo Umberto Vergine told NGA that the government there would try to encourage local gas monetisation schemes but that Eni’s view is that “the core LNG project must be onstream first.” Any local gas market schemes, such as a pipe from northern Mozambique (where the offshore reserves are based) to the capital Maputo in the south, or even a small LNG regas scheme in Maputo, would follow later.
Economics did not favor GTL projects anywhere, at current depressed global diesel and gasoline prices, said Vergine, adding it might even make more sense to develop gas locally as a vehicle fuel.
He added that Eni had had no talks with an early-stages $6bn gas pipe concept to South Africa, proposed on March 1 by tiny independent SacOil with local private partners.
Speaking earlier in the presentation, CEO Descalzi said that Eni had driven down break-even on newly sanctioned upstream projects from $45/b in 2014 to $27/b in 2015 but gave no pointers for a break-even price on specific LNG projects going forward.
Mark Smedley