Golar LNG Terminal in Ghanaian Limbo
Golar LNG has admitted that its floating LNG import terminal (FSRU) has been anchored offshore Ghana since May with no guarantee it will dock soon. The vessel had been expected to become West Africa's first LNG import terminal by June of this year.
“Charterers of the FSRU, West African Gas Limited (WAGL), have however experienced significant delays with respect to the part of the project for which they are responsible," said Golar LNG in its 2Q results on August 31: "Golar Partners who own the FSRU Tundra are however entitled to payment of hire and invoices have been issued for this.” Amounts due under the contract started to accrue from mid-July, it added.
WAGL is a joint venture of state Nigerian National Petroleum Corp and Nigerian private generator Sahara Energy. The FSRU project had been intended to balance out unreliable flows through the West African Gas Pipeline from Nigeria, in which NNPC is also a partner, but has itself become a problem.
“Although Golar continues to receive assurances that the project remains intact, [it] has sought and received a positive opinion which strongly supports its legal position in exercising its rights under the contract, should WAGL contest their obligations under the charter," said Golar LNG, adding that it "maintains a constructive dialogue with WAGL with regards to finding a mutually agreeable way forward for the project which is both needed and supported by the government of Ghana.” In late June, Ghana’s deputy power minister John Jinapor told NGW in London that a ratification from parliament was still needed before any LNG imports into the country were allowed. The country's electricity sector problems have continued since.
Ghana's deputy power minister John Jinapor (Photo credit: YouTube)
Despite problems in Ghana, Golar LNG said that the “market generally for FSRUs remains positive.” However few other things are going right for the company now. LNG tanker spot charter rates in 2Q remained low at $30,000/day for diesel-electric carriers, and sub-$20,000/day for less modern vessels, with very few opportunities for backhaul charters, it said.
As a result Golar LNG made a net loss of $99.5mn in April-June 2016, up from an $80mn loss in 1Q 2016. Earnings before tax and interest (Ebitda) were a loss of $17.5mn, compared with a 1Q 2016 loss of $21.7mn.
More positively, Golar said that delivery to the Perenco-led Cameroon FLNG project of its floating liquefaction vessel now being converted, FLNG Hilli, remains on track for next year, and may be run at a higher capacity than first forecast given the “suspension of Engie's proposed land-based LNG project” there. If that happened, it would increase Golar LNG’s earnings from the vessel.
But offshore Equatorial Guinea, UK developer Ophir and Golar “continue to explore ways to develop the Fortuna reserves” with an investment decision still not yet taken. Projected economics even at current gas forward prices are strong, said Golar LNG, but the “biggest challenge for the project is to secure alignment between the upstream and midstream partners” that is needed to ensure financing for the entire project. Good progress had been made on both fronts in 2Q, it said. However the earliest that Fortuna FLNG may start now is 2020.
During 2Q, Golar LNG also inked agreements with US private venture firm Stonepeak to finance future FSRU operations, and with Schlumberger regarding future liquefaction projects.
Mark Smedley