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Ophir signs HoAs for LNG offtake from the Fortuna FLNG project

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LNG Industry,

Ophir Energy has released a statement claiming that it has signed Heads of Agreements (HoAs) for LNG offtake from the Fortuna floating LNG (FLNG) project with six counterparties.

The estimated gross capital expenditure (CAPEX) required to first gas was initially US$800 million, but has decreased to US$600 million. This is based on the recent input from the upstream FEED work.

Ophir will sell 2.2 million tpy of LNG offtake, but the requested total demand under the HoAs has seen the offtake sold several times over. A number of varying pricing constructs with formulae that consist of European gas market netbacks, oil indexation or a combination of both form the basis of the HoAs. Offtake under several HoAs includes the sharing of incremental diversion income earned over the base contract formula for volumes of LNG that are subsequently sold into markets with a higher value.

In addition to pricing structure, Ophir has secured other elements to its LNG offtake HoAs that are relevant to the project, including the offer to pre-pay for substantial volumes of LNG over the early contract years. Funds received from pre-payments could become major contributors towards the project, as they could cover approximately 30 – 50% of Ophir’s total net cost to first gas.

In addition to this, Fugro has been contracted by Ophir to provide geotechnical, environmental and metocean surveys for the Fortuna project. Several Fugro vessels, including the Fugro Searcher, Fugro Scout and Fugro Frontier, will perform these duties, which are expected to be complete in January 2016.

Nick Cooper, the Chief Executive of Ophir, said: “The Fortuna FLNG project continues to move forward on schedule with the now formal signing of all the HoAs for gas offtake with a core group of LNG buyers. Each offtaker’s proposal offers something different, thereby providing Ophir with a range of pricing formulae and differing commodity risk profiles which will be helpful when we narrow down the short list in Q1 2016.

“We are also pleased to report that the estimated cost to first gas has been reduced by a further 25% during FEED. This cost reduction, plus the offered LNG pre-payment mechanisms materially reduce the amount required to fund Ophir’s portion of the project ahead of the Final Investment Decision in mid 2016.”

Edited from press release by David Rowlands

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