Africa Oil & Gas: Egypt seeks to end Hoegh FSRU charter

Oslo-listed ship owner Hoegh LNG admitted its faces tough negotiations ahead in Egypt, which wants to terminate the charter of one of its floating import terminals (FSRUs) early, as it reported higher year on year 1Q profits and income May 31.

FSRU Hoegh Gallant is employed on a five-year time charter with Egypt’s state Egas at Ain Sokhna, Egypt. However in 1Q2018, Egas requested to start a discussion with Hoegh LNG about terms for an early termination of that contract, which runs to April 2020. Such an agreement requires Hoegh’s consent.

Italian Eni’s discovery of the giant Zohr field was made after the contract began and as the field’s gas production has risen quickly, the Egyptian energy ministry has said the country would stop importing LNG this year.

Were Hoegh to agree to the early termination, the company’s CEO Sveinung Stoehle told analysts on a 1Q conference call May 31, it would require some remuneration for releasing Egas from its charter early; other options could be an extension of the charter with a price review, or legal action. (Hoegh Gallant is the 2nd ship from the left in the banner photo taken at Ain Sokhna, courtesy of Hoegh LNG)

On a more positive front, a ship earmarked for deployment in Ghana mid-2018 has instead been put to work four months earlier. Hoegh Giant began a three-year time charter as an LNG carrier for Spain’s Gas Natural February 7. Originally earmarked to serve as a FSRU in Ghana for Quantum Power from mid-2018, Hoegh said May 31 that “as formal milestones [for the venture] had not been met within the agreed timeline, the agreement between Quantum Power and Hoegh LNG has expired.”

Whereas the Ghana venture has disappointed Hoegh, its CEO Stohle told analysts that tendering worldwide for FSRUs this year has been its busiest for some time. Hoegh is a leading FSRU owner/operator.

Stoehle also said Hoegh’s eighth FSRU, Hoegh Esperanza, was delivered in April and is now set to start a three-year time-charter with “an energy major” on a hybrid FSRU/LNG carrier basis in the coming weeks, providing a full contribution from 3Q2018 onwards. The ship already loaded a maiden cargo on May 21 at the QCLNG plant in Australia, which is operated by Shell.

Hoegh LNG reported a net 1Q profit of $13.2mn, up from $11.4mn in 1Q2017.