Eni Announces FID on Coral FLNG
Eni has confirmed that final investment decision (FID) has been taken on its 3.4mn mt/yr Coral South floating liquefaction (FLNG) project. It made the official announcement in a stock exchange filing shortly after 4pm GMT (6pm Italian time) on June 1.
Coral will be the first LNG project in East Africa, and one of the first FLNG projects developed although is not expected to produce until 2022.
Eni said that FID now has been taken just three years since it drilled the final exploration well.
Eni CEO Claudio Descalzi and Mozambique's president Filipe Nyusi took part in an event June 1 to launch the Coral South LNG project implementation in the country's capital Maputo along with top executives of partner firms CNPC, Galp, Kogas and state ENH.
"During the ceremony all the drilling, construction and installation contracts for the production facilities were signed, as well as agreements with the Mozambican government for the regulatory framework and financing of the project, " said Eni.
"Despite the challenging price environment in the last few years, the launch of this project is testament to the quality of the assets in place and to Eni’s
technological leadership in the development of deep-water gas fields. The FLNG unit, a symbol of engineering expertise, will have a capacity of around 3.4mn mt/yr," said Eni.
FLNG facilities construction will be financed through project finance covering 60% of its entire cost, said Eni, adding that this is first project finance ever arranged in the world for a liquefaction floater. It said the financing agreement has been subscribed by 15 major international banks and guaranteed by five export credit agencies.
Descalzi said: "The Coral South Project will deliver a reliable source of energy while contributing to Mozambique’s economic development. This partnership approach with our hosting countries is the foundation on which our joint sustainable growth strategy is built.”
The Coral field, discovered in May 2012, is located in Mozambique Area 4 and has 450bn ft3 of gas in place (16 trillion ft3) of gas in place, said Eni.
In October 2016, Eni and partners contracted the sale of the entire 3.4mn mt/yr Coral FLNG offtake for 20 years to BP.
In March 2017 ExxonMobil confirmed it would buy, from Eni, a 25% indirect stake in the natural gas-rich Area 4 block offshore Mozambique for $2.8bn. It's understood that transfer has yet to be completed.
After completion, Eni will retain a 25% indirect stake while China CNPC's indirect stake will remain 20%. ENH, Portugal's Galp, and South Korean state utility Kogas, each have 10% direct stakes in the Area 4. Eni will lead the FLNG development, while Exxon will handle later onshore liquefaction phases.
Total project cost for Coral FLNG, including upstream investment to date, is unofficially estimated at some $8bn.
“Using a vessel to liquefy gas offshore will allow the partners to realise cash flow from Mozambique earlier. The project will generate annual gross revenues of over US$1.5bn per year (before tax) for 25 years, utilising 4.7 trillion ft3 of gas over its lifetime. With FID out of the way, the project is now on track for first LNG production in 2022," said consultancy WoodMac's research manager for southern and east Africa, Alasdair Reid.
That target date for first LNG was absent from Eni's communique, and is anyway some two years later than Eni had originally envisaged -- largely because difficulties in arranging financing in debt-laden Mozambique, and other matters, set back the schedule for FID from mid-2015 to mid-2017.
The country's government has been criticised behind closed doors by the IMF and World Bank for hiding state debt off its balance sheet.
"This is really good news for the government of Mozambique. It demonstrates that, despite ongoing credit issues, there is still enough belief in the investment climate for partners to raise finance and move projects forward," added WoodMac's Reid.
Eni said it has committed to improve access to energy, water, health and sanitation, education and training for the local populations of Cabo Delgado province and in the Mozambican capital Maputo. Average life expectancy in 2009 in Mozambique was 41; it is believed that life expectancy in Cabo Delgado province remains below this even now -- with the province also having one of the lowest life child birth rates of any Mozambican province.
Italy's ambassador to Mozambique, Marco Conticelli, congratulated Eni, noting that Italy is the leading European investor in the African nation.
FLNG is already in production in Malaysia (PFLNG) and will be later in 2017 in Cameroon (Kribi LNG), followed next year by Australia (Shell's Prelude), with other projects following in the early 2020s in Mozambique (Coral) and Equatorial Guinea (Fortuna FLNG).
Mark Smedley