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Gunvor offers Equatorial Guinea funding help in bid for LNG

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LNG Industry,

Reuters are reporting that Gunvor has offered to help Equatorial Guinea with financing as the Swiss commodity trader looks to edge out rivals bidding for supply from Africa's first deepwater FLNG plant.

Gunvor, Vitol and Royal Dutch Shell have been shortlisted for an LNG off-take deal from the US$2 billion Fortuna project with a decision expected this month.

Gunvor is looking to help state-run Sonagas finance a 30% stake in the project in return for selecting it to export gas from it.

Pre-financing deals where players with funding lend it to companies or countries for projects in exchange for supply later on are common in oil but still rare in LNG.

A successful deal would make Gunvor one of the first trade houses to secure a mid- to long-term LNG supply deal, showing the aggressive steps traders are taking to gain a foothold in production.

Gunvor itself would not own a stake in Fortuna under its proposed deal. Instead, Sonagas would take a stake and could potentially also take profits on LNG exports via a joint venture with Gunvor.

First though, Fortuna's current owners would have to dilute their stakes to make way for Sonagas' entry.

The OneLNG consortium comprising shipping firm Golar LNG and oil services provider Schlumberger owns a 66.2% stake in the project. Ophir Energy owns the remainder.

With ample supply holding spot LNG prices LNG-AS at multi-year lows, Fortuna's owners are refraining from selling its entire output, betting prices will rise by the time they start production in 2020.

Fortuna will likely sell only as much LNG as it needs to secure bank financing – roughly half the plant's output – in order to keep the rest to trade.

Chinese funders, including China State Shipbuilding Corp, are providing US$1.2 billion in loans to Fortuna.

Gunvor has landed several major deals this year in key LNG growth markets.

In January it outbid rivals to win a tender to supply about 60 LNG cargoes to Pakistan over a five-year period. In March it agreed a swap deal with Gail India, giving it access to cheap US supply.

Equatorial Guinea Oil Minister Gabriel Obiang Lima said the main criteria for deciding on the Fortuna off-take deal would depend on who offered the highest price and best terms.

Fortuna will be Africa's first deepwater floating liquefaction facility with production capacity of 2.2 million tpy and start-up expected in 2020. 

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