Oil & Gas Industry: Eni Considers Building FGLP Off Mozambique Coast

Italy’s largest energy company, Milan-based Eni, is considering building a multi-billion dollar floating liquefied natural gas plant (FLNG) off the coast of Mozambique’s northern Cabo Delgado province.

Eni holds a controlling stake in the Mozambique’s gas-rich offshore Area 4 field at its Mamba 1 North and Mamba 1 South concessions in the Rovuma basin. Eni has been operating in the southeastern African nation since 2006.

On April 15, Eni released a “Public Announcement for Expression of Interest” in a 2.5 million metric ton per annum FLNG. The announcement invited companies that could build such a plant to express their interest, which would lead to “a potential Invitation to Tender package” from Eni.

Eni is seeking a “Front End Engineering Design for a floating LNG facility, and possible future phases of detailed engineering, procurement, construction, installation, commissioning, and of operation and maintenance services” of “a turret moored double-hulled floating facility type,” which would “receive, process up to liquefaction and store liquefied natural gas produced from sub-sea wells, and subsequently offload it onto LNG carriers for export.”

Interested companies have until May 5 to submit the relevant documentation.

Industry sources said at least four consortia will likely receive bid documents to participate in Eni’s FLNG development, which would only be Africa’s second, after Ophir Energy’s Block R project in Equatorial Guinea.
  
Confirmed contenders include South Korea’s three major yards and a Japanese yard, Upstream reported. Engineering and construction companies in Asia, the U.S. and Europe have stakes in all four.

A major advantage of locating the facility offshore is that the FLNG and its equipment could be built in a world-class shipyard, as Mozambique has no shipyards capable of constructing such advanced vessels, unlike shipyards in East Asia.

Eni is already heavily invested in Mozambique and sees vast potential. On its website, it says, “The exploration campaign executed in Mozambique in the Area 4 offshore the Rovuma basin proved the Mamba gas complex to be the largest discovery in the Company’s exploration history.”

Eni’s geological studies have confirmed the high productivity of its exploratory wells, which would allow Area 4’s hydrocarbons to be exploited with a limited number of oil and natural gas-producing wells, making the project highly efficient.

Eni has its eye on exporting Mozambique’s LNG to East Asian markets, having had advanced discussions with China’s CNPC and South Korea’s KOGAS, which together own a combined 30 percent equity in Eni’s Mozambique concession.

Mozambique is geographically well positioned to export LNG to Asia as long as its export projects come online before planned LNG developments in Australia, Canada, Russia and the U.S.

Eni’s Mamba share holds 50 trillion cubic feet (tcf) of in-place gas, while about 35 tcf is in Eni’s Area 4 concessions.

Eni is the operator of Area 4, with an indirect 50 percent participating interest owned by Eni East Africa, which holds 70 percent of Area 4. The other partners are Galp Energia (10 percent), KOGAS (10 percent) and ENH (10 percent, exploration phase only). In Area 4, CNPC holds an indirect stake of 20 percent through Eni East Africa.

Africa looms large in Eni’s future. The company’s 2014-2017 strategic plan states, “Over the next four years, Eni will continue to focus on exploration… Key areas for Eni’s exploration are Mozambique and Kenya in East Africa, Congo, Angola and Gabon in West Africa…”

Eni also plans to partner with Anadarko, which holds the Area 1 concession, to build onshore LNG trains at Afungi in Palma district in Cabo Delgado province. 

If everything goes as planned, Eni will add two additional 2.5 mtpa FLNGs to their Area 4 operations.

But it might not be all smooth sailing ahead for Eni’s planned FLNG. There are enormous technical challenges involved in building huge structures that can withstand major storms at sea – and Indian Ocean’s northern Mozambique Channel is frequently hit by cyclones.

There may be political storms, as well.

A Mozambique-based anticorruption NGO, the Center for Public Integrity, has criticized the government for failing to hold public consultations on a draft law on natural hydrocarbon resources that will soon be submitted to the parliament. The law is intended to establish a national legal framework for the Afungi LNG facilities, but there is currently no mechanism for providing public input, which has led many activists to fear that decisions will be made in secret rather than openly discussed.

Eni has said that its investment in the Afungi LNG could reach $50 billion.

In statement issued March 18, CPI said, “The government has not informed the public of the process nor has it encouraged public discussion on the monumental choices facing the country. Given past practice, we worry that there will be no public consultations at all.”

By John Daly of Oilprice.com