Golar, Schlumberger Form OneLNG JV
Six months after signalling their plans to do so, Golar LNG and Schlumberger announced July 25 the creation of a joint venture, OneLNG, to “rapidly” develop low-cost gas reserves to LNG.
“OneLNG will be the exclusive vehicle for all projects that involve the conversion of natural gas to LNG which require both Schlumberger Production Management services and Golar's Floating LNG expertise,” the two firms said in a joint statement.
Schlumberger told NGE it was too soon to say where OneLNG's first project would be as it "is currently evaluating all business opportunities that have the potential to create value for the JV partners and its customers."
Golar will have 51% and Schlumberger 49% ownership of the joint venture and both have agreed an initial investment commitment to cover the estimated equity needed to develop the first project.
Despite not naming what that first project will be, their joint statement insisted: “After reviewing the current market opportunities where 40% of the world's gas reserves can be classified as stranded, both parties are excited at the future prospects of OneLNG and are confident that it would conclude five projects within the next five years.” The statement argued that “the combination of Schlumberger reservoir knowledge, wellbore technologies and production management capabilities, with Golar's low-cost FLNG solution, will offer gas resource owners a faster and lower cost development.”
The parties said they will, on a project-by-project basis, discuss additional debt capital as required. Such future financing would take into account Golar's Floating LNG intellectual property through an equitable contribution mechanism to be agreed between the parties, the statement added.
FLNG investment requires deep pockets
Rival shipowner Hoegh LNG said five months ago it was shelving investment in FLNG, owing to its high costs. US rival Excelerate Energy is continuing, but has no specific project yet.
On April 29, Schlumberger itself backed out of a planned 40% farm into UK-based Ophir Energy’s planned Fortuna LNG project off Equatorial Guinea, in which Golar remains the FLNG contractor. Golar said then that its talks on forming a joint venture with Schlumberger would continue. An investment decision by Ophir is pending, with start-up now penciled in for 2020, rather than 2019.
Africa’s first FLNG is expected to be one being developed offshore Cameroon by Perenco and state SNH, due for start-up mid-2017 including a FLNG production vessel being provided by Golar. The company told investors last month in New York that the conversion of its Golar Hilli vessel to a FLNG production ship was following an "aggressive schedule" but that it remains "within its delivery window."
LNG tanker Golar Hilli now being converted to a Floating LNG production vessel (Photo credit: Golar LNG, June 2016 presentation)
Other FLNG projects under development include Petronas’s PFLNG Satu offshore Malaysia and Shell’s larger Prelude project offshore Australia. Eni’s Coral FLNG offshore Mozambique – like Ophir's Fortuna FLNG – is pending an investment decision.
Last week Schlumberger reported a 2Q 2016 loss of $2.2bn.
Mark Smedley