LNG to grow in Sub-Saharan Africa - Part Two

Tanzania

Tanzania is estimated to hold significant reserves of gas offshore, equating to approximately 55 trillion ft³ of recoverable resources. BG Group and Statoil are currently developing the country’s only proposed LNG liquefaction facility, which will be fed by gas sourced from Blocks 1 and 2. The facility, which has an expected CAPEX of approximately US$30 billion, will comprise of at least two trains, each with a capacity of 5 million tpy. The FID is now expected in 2016 with the project due to come onstream later than the Mozambique projects, in 2022. The project developers are awaiting a final decision from the Tanzanian government regarding site selection, which is expected to be located in either Lindi or Mtwara.

In October 2014, the Tanzanian government approved a long awaited policy to regulate the natural gas industry. This policy, which corresponds to the Production Sharing Agreement (PSA) that was updated in 2013, states that the domestic market must receive priority with regards to gas supply.

At the same time, the government approved its midstream-focused natural gas policy. An additional policy outlining the exploration and production of the gas sector is currently under development. The progression of this proposed policy has stalled as it will now not be discussed in Parliament, as was previously expected. Due to the upcoming general elections during 2015 it is not known when the bill will be taken to Parliament. Local content requirements are currently outlined in the 2013 PSA that states that companies must comply with the first draft of the government’s local content policy released in April 2014.

This delay leaves Tanzania at a disadvantage compared to Mozambique and may potentially disturb any foreign investment. Companies, including BG Group, have stated that they will not rush into making any investments decisions due to the planned general elections – the outcome of which may have an effect on the new petroleum policies.

West Africa

West Africa is the traditional LNG producing region within Sub-Saharan Africa and many nations, most notably Nigeria, have existing LNG liquefaction capacity. The expansion of many of these existing LNG liquefaction facilities is planned alongside the development of new export facilities. Currently, the development of these new projects is experiencing several delays.

Nigeria

Nigeria is currently the largest producer and consumer of gas within Sub-Saharan Africa, and is the fifth largest global exporter of LNG. The country’s existing LNG liquefaction facility is located at Bonny Island. The plant commenced operations in 1999 and its capacity has continually been expanded since. Train 6 commenced operations in late 2007, bringing the total capacity up to approximately 22 million tpy. At present, Train 7 is under development and Train 8 is within the planning stages. Both trains are proposed to have a capacity of 8.5 million tpy each, making them the largest LNG trains in the world. Train 7 was due to come onstream in 2016. However, delays have been experienced, making it likely that the project will become operational at a later date.

Other LNG liquefaction projects within Nigeria have not been so successful in terms of project development. The FID for the Olokola LNG and Brass LNG projects have been repeatedly delayed, along with shareholders pulling out of both projects. However, the remaining partners in the Brass LNG Project have stated that they plan to move ahead with development without a replacement for ConocoPhillips, who has relinquished its stake.

Many of these LNG liquefaction projects originally highlighted North America as the target export market. However, both the US and Canada are now developing their own LNG export infrastructure – a consequence of the shale gas boom. This has meant that many LNG liquefaction projects have found it hard to secure long-term market commitments, which often help to secure project financing.

Delays have also been experienced in passing the controversial Petroleum Industry Bill. Due to political friction, it has taken five years for the Bill to be brought to a vote by Parliament. Following the recent general election held in February 2015, it is hoped that the Petroleum Bill will be passed in the near future to assist project development.

Equatorial Guinea

Equatorial Guinea has one existing LNG liquefaction train, with a capacity of 4.3 million tpy, which commenced operations in 2007. It has been stated that the facility, operated by Marathon Oil, is the fastest developed LNG project from project conception to FID. A second train is planned to be added to the existing site located on Bioko Island, and will increase capacity by approximately 4.4 million tpy. This expansion was initially planned in 2006 but development has been slow with Mitsui & Co. now in talks to sell its stake in the project.

Ophir Energy is currently developing an FLNG project with the gas to be sourced from the company’s operated Block R. This is favoured as an alternative option to an additional onshore train. The FLNG vessel will have a lesser capacity of 3 million tpy but is the cheaper option. In November 2014, Ophir agreed the fiscal terms with the government of Equatorial Guinea regarding the gas production sharing contract, displaying its commitment to the project. At the same time, Excelerate Energy was selected as the lead midstream partner for the FEED phase. This phase of the development was due to commence in late 2014 but the planned Memorandum of Understanding (MoU) has not yet been signed by all relevant parties. With several recent gas discoveries (e.g. Ophir’s discovery in September 2014), it is likely that more LNG liquefaction capacity could be developed within Equatorial Guinea.

Angola

Angola’s existing LNG liquefaction facility, located near Soyo, unexpectedly shut down in April 2014 due to technical difficulties in the gas processing plant. The LNG facility, which was initially commissioned in June 2013, was expected to recommence operations during 2015. However, it is now thought that operations will restart in 2016, depending on the extent of the damage. Reconstruction is expected to be a long and costly process, with additional repairs required due to previous deterioration experienced by the facility. The expansion of the facility, with the addition of another liquefaction train, was planned due to gas discoveries made by Eni. It is, however, unlikely that this expansion will materialise, at least until the first train is fixed.

This article originally appeared in the June 2015 issue of LNG Industry. Part Three will be available soon.

Written by Fiona King, EIC, UK. Edited by Katie Woodward

Read the article online at: https://www.lngindustry.com/special-reports/18062015/eic-africa-article-part-2/