Galp Quiet about Coral FID Delay
Galp finance chief Filipe Silva told analysts at the Portuguese oil and gas producer’s capital markets day this week in London that Galp's board two months ago gave its management team a strict set of instructions for taking the future final investment decision (FID) on the Coral South FLNG offshore Mozambique: “It’s just an in-principle green light, subject to a number of conditions that we’re working on.”
Galp's February 21 presentation though gave no clues when or if Chinese partner CNPC might give its approval, or when Coral FID might be taken. All other partners – Eni, Mozambique state ENH, and South Korea's Kogas – have given their board's approval to the 3.4mn metric ton/yr FLNG project.
Coral FID, originally to be taken mid-2015, is now almost two years overdue; reports suggest that first commercial LNG would be no earlier than 2022.
Mozambique's state news agency AIM put Coral FLNG's overall project cost at $8bn, of which $2.8bn had already been invested during field exploration. The government there has been struggling to meet debt repayments and is mired in a controversy over 'secret loans'.
Silva said February 21 that Galp plans $2bn of capital expenditure on Mozambique over the next five years for both Coral and Mamba combined, of which $1bn would be project finance. The $2bn would cover Galp's 10% equity stake in the Eni-operated offshore Area 4 (including both fields).
Galp finance chief Felipe Silva (Photo credit: Galp)
Coral South FLNG would be the fourth or fifth FLNG unit launched globally and so should benefit from lessons learned on earlier projects, upstream chief Thore Kristiansen told the same event. He insisted the next project to follow Coral South FLNG in Mozambique would be an onshore liquefaction unit – most likely, two trains each of 5mn mt/yr – to liquefy Mamba gas. That contrasts with some remarks months ago by Eni to the effect that two FLNG units might initially be launched on Coral, before work began onshore for Mamba gas.
A Galp spokesperson said later that FID on Coral FLNG is dependent on all partners' agreement but, most importantly, on closing of project finance. More light may be shed on the project at Eni's 2016 results and 2017-20 strategy briefing on March 1.
Galp meanwhile issued its 2016 results February 21: 2016 capex was €1.2bn, of which 85% went upstream on developing Brazil’s block BM-S-11. Its net profit of €483mn last year was 24% lower than in 2015; its 4Q 2016 profit 18% lower year on year at €121mn.
Galp also said the first ever deepwater well offshore Portugal is planned by Eni, with Galp its 30% partner, this year in the Alentejo basin. Further exploration drilling is also planned offshore Brazil in various blocks (where Statoil and Petrobras are operators), and in four blocks offshore Sao Tome e Principe (where Galp itself and US Kosmos are operators).
Net production for 2016 was up 51% at 65,100 barrels of oil equivalent/day, with that in 4Q 2016 alone 68% higher year on year at 82,700 boe/d thanks to new oil production from offshore Brazil fields.
Galp’s direct sales of gas were down 2% at 3.78bn m³ for full year 2016; additionally LNG/gas traded volume was 3.285bn m³, down 14%. Operating earnings (Ebitda) from gas and power was down 18%, in contrast to upstream which was up 40%. Net debt was down slightly at $8.4bn.
Mark Smedley