[NGW Magazine] West African LNG All at Sea
The early promise of west African LNG import projects stands in stark contrast with today's reality: national governments have not shown the necessary interest, but the string of investors shows a continuing appetite to learn from mistakes.
West Africa in mid-May exported the first cargo from the region’s first floating liquefied natural gas (FLNG) venture, offshore Cameroon, a little behind schedule, and was loading a second at the end of May.
But the region has been a flop when it comes to LNG import ventures – with three in Ghana, one in Cote d’Ivoire, and another in Namibia throwing in the towel.
In Ghana, one has led to an ongoing arbitration dispute over a ship kept idle at sea for 15 months, another is close to bankruptcy, while a third has redeployed its intended ship elsewhere for three years. Total is keeping quiet about its Cote d’Ivoire venture, which should have launched mid-2018. And a flawed tendering process and lengthy legal battle has led to cancellation of the Namibian project.
Two years ago, it all looked so different.
Floating storage and regasification units (FSRUs) were to have been the flexible answer to west Africa’s energy deficit – after Nigeria failed to supply enough gas through the West Africa Gas Pipeline (WAGP). Flexible, low-cost FSRUs were to have supplied clean energy to displace dirty fuel oil burned in the region’s power plants and shipping.
Moreover, a supposed glut of worldwide LNG exports provided an ideal opportunity to develop cheap imports into the region.
Everywhere else too, from China to the Caribbean, floating LNG import projects are in demand.
The CEO of one of the leading FSRU owners Hoegh LNG, Sveining Stohle, said May 31 that tendering worldwide for FSRUs this year has been its busiest for some time. In a quarterly results call, he reeled off a dozen countries where tenders for FSRUs have been held, or will take place, this year – namely Australia, Brazil, Colombia, Croatia, Cuba, Cyprus, Lebanon, Mexico, Myanmar, Pakistan, Thailand and the United Arab Emirates.
Moreover he pointed to Bangladesh installing its first FSRU and Turkey its second so far this year, with India to follow in this October (first FSRU, albeit fifth import terminal) and Bangladesh’s second FSRU in December.
In contrast, west African governments never swung behind the projects, partly as FSRU ventures never seemed to be consciously structured to cover short-term LNG needs – in a way that host states could comprehend – until such time as local indigenous offshore gas production took off.
It’s a learning curve: Vitol
Ghana shouldn’t be written off as a lost cause for LNG, Vitol’s head of gas-to-power projects Stephen Brown told the Africa Oil and Power conference in London May 10, when asked by NGW if it was among the countries that have ‘burned’ FSRU investors once too often.
The Swiss firm is interested in the region’s gas market prospects but has not dabbled with LNG in Ghana.
Brown though insisted: “Ghana is a good place. LNG is a long learning curve. Pakistan had five failed LNG import projects between 2003 and 2015 before it took off there. Ghana tried to fast-track LNG.”
The Sankofi field [part of the ongoing OCTP development offshore Ghana] had been discovered in 2009; this year Eni and Vitol will start supplying Sankofi gas to Ghana, said Brown.
OCTP will be the third big oil and gas field offshore Ghana, following the Tullow-operated Jubilee in 2009 and TEN in 2016. First gas from TEN is expected mid-2018.
“LNG could have filled the gap. But investing in Africa and globally is about learning; each time we have a ‘Ghana’, everyone learns from it,” said Brown.
Sahara hopes for revival
Sub-Saharan Africa’s very first LNG import project was to have been the WAGL 60-40 joint venture of Nigeria’s Sahara Energy with state Nigerian NNPC, using the FSRU Golar Tundra. It had been due to start imports around mid-2016.
Shipowner Golar supplied the ship on time late May 2016. The ship then idled at anchor offshore Ghana’s port of Tema until September 2017 when Golar decided that WAGL had neither secured government approvals – not least the right to import any LNG – nor built any necessary land-based infrastructure at Tema.
Golar said May 31 2017 it had been granted an interim arbitration award of $23.3mn for the charter period to end-2016 and was pursuing a further $22mn through arbitration but a year later there was no update.
Sahara Energy co-founder and director Tope Shonubi told the May 10 conference in London that this FSRU project at Tema was “meant to have been an intervention project” – helping out at times when Ghana’s indigenous gas could not meet peak demand – rather than supply year-round baseload gas.
“The project fell through,” Shonubi acknowledged, without quite saying that WAGL had caused Golar Tundra’s enforced 15-month downtime: “Did we take all the safeguards? No, we didn’t. Hopefully the arbitration [initiated by Golar] will come to an end. These are the risks you take.”
Shonubi later told NGW that Sahara is hoping for a negotiated out-of-court settlement and, despite its flawed project, still wants to develop an LNG import project, but this time at Takoradi, to the west of Tema. He added that Sahara now hopes to charter a smaller FSRU by the end of this year, but Golar did not comment on the chances of that.
Golar Tundra can regasify up to 7.5bn m³/yr and store up to 170,000m³ of LNG. Shonubi told NGW that a smaller vessel at Takoradi could still fulfil some role in Ghana’s ‘intervention market.’ Meanwhile, Golar Tundra is operating as an LNG carrier on a spot basis while “seeking FSRU opportunities”
Ghana’s other projects
A small-scale LNG import venture by Norwegian shipowner IM Skaugen was to have begun importing mid-2017 at the port of Aboadze in western Ghana. But since then, everything has gone quiet and Skaugen filed for bankruptcy protection in Singapore’s high court May 31.
One month earlier it presented a restructuring plan that Skaugen said had support from most stakeholders and now has a month’s court protection to complete the plan, but is seeking longer.
Ghana’s other venture was to have been at Tema: shipowner Hoegh LNG however said this February that its joint project with Israeli-owned Quantum Power to deploy an FSRU remained subject to government approval.
Hoegh went further: “As formal milestones [for the venture] had not been met within the agreed timeline, the agreement between Quantum Power and Hoegh LNG has expired,” it said May 31.
FSRU Hoegh Giant, which was to have started operations at Tema by mid-2018, has instead been chartered out on a three-year basis to Spain’s Gas Natural and is earning money.
Ghana’s energy minister Boakye Agyarko, also at the Africa Oil & Power conference as a non-speaker, told NGW that despite the setbacks, the government remains in talks with the various LNG investors in Ghana, and is considering a smaller role for LNG. That could include supplying bunker fuel for ships, and an ‘intervention-only’ role as a fuel in the power market.
Yet it’s difficult not to conclude that, for Ghana, that metaphorical ship has now sailed. Late payments by government power suppliers to independent power producers (IPPs) haven’t helped the situation for investors either. So those IPPs must cope with fluctuations in available offshore gas supplies, without any of the security of supply that LNG in storage might provide, and with little reliability in the amount of Nigerian piped gas imported through WAGP.
Total adrift
Total meanwhile told Reuters late February 2018 it remains ready to take a final investment decision in Cote d’Ivoire’s LNG import project, just as soon as the government gives the green light.
Total had announced November 2016 that the project was awarded rights to develop an LNG import terminal with regasification capacity of up to 3mn mt/yr in Cote d’Ivoire, expected to become operational by mid-2018. The consortium developing the project comprises seven companies, including Total as operator (34%), Azeri state Socar (26%), Anglo-Dutch Shell (13%) and Golar (6%). NGW has asked Total more than once this year if it has yet chartered an FSRU for this project but got no response. It is assumed that it has not.
French engineers Sofregaz performed pre-front-end engineering and design (Feed) work for a terminal at Vridi near the Ivorian capital Abidjan. This included an FSRU with 170,000 m³ storage capacity and regasification capacity up to 3mn mt/yr. But Sofregaz has not responded to requests for a project update either.
Namibia Tumbles Too
Plans by Namibia to import LNG for its power generation have also been scrapped, as it too sees if it can persuade a developer (BW Offshore) to develop its long-shelved Kudu gas field for local use.
Last year’s IEA Gas Market Report said that Namibia was expected to begin LNG imports in 2018, using an FSRU with 6.3bn m³/yr regasification capacity, under a partnership of local firm Xaris Energy and US shipowner Excelerate Energy.
Xaris was awarded a long-term power purchase agreement (PPA) by NamPower in 2015 that was key to its planned LNG import/250-MW power plant project at Walvis Bay. But the award was contested by Arandis Power, whose planned 120-MW fuel oil-fired power plant lost out.
Although the high court in July 2016 threw out the challenge, Arandis won on appeal to the supreme court in March 2018. This invalidated the 2015 PPA and both Nampower and Xaris had to pay costs.
Namibia’s new energy minister Tom Alweenda was quoted by local newspaper The Namibian as early as March 1 2018, saying that NamPower had terminated the long-term N$5bn deal for Xaris.
The Supreme Court hearing took place the same day, although its ruling was delivered March 16. Sources at a recent event in London told NGW that the Xaris project is therefore scrapped.
Arandis is looking at developing a 120-MW fuel-oil-run power plant though it says it could be adapted to run on Kudu offshore gas if developed. Its project site however is far from the coast. Kudu meanwhile has had a long list of developers since its 1974 discovery by Chevron, and each in the end has walked. BW Offshore though says its plan is to take FID by the end of this year, with the gas to be used at a dedicated 440-MW NamPower-run power plant.
Equatorial Guinea Pitches In
But the appetite to scope new markets for LNG in West Africa seems inexhaustible.
Now Equatorial Guinea plans to set up an LNG regasification unit at the port of Lomé in Togo, according to a May 30 report by news service Togo First, citing Togolese energy minister Marc Ably Bidamon. He said other landlocked countries like Burkina Faso, Niger and Mali could also receive LNG via Lomé.
Equatorial Guinea has signed no agreement with Niger and Mali, but it has in recent months signed memorandums of understanding with both Togo itself as well as Burkina Faso – both part of an ‘LNG2Africa initiative’ that Equatorial Guinea is promoting, with supplies due to start in the early 2020s.
Asked about the planned unit’s capacity, Bidamon said talks are ongoing between both concerned parties and that things would be clearer in the weeks to come.
It is not clear who would finance and operate the Togo LNG regas terminal, or if it would be FSRU-based like the Golar and Hoegh model, or more like Skaugen’s small-scale onshore model.
Togo plans to build a second thermal power plant (60 MW) in Lomé to meet its growing power demand, which would run on regasified LNG, Bidamon further told Togo First. Four firms have expressed an interest: Siemens together with Paris-based Eranove, plus separately Turkey’s Aksa and Italy’s Ascot. The minister said the joint Siemens-Eranove was better, as Eranove might run the LNG terminal. The latter owns the 556-MW ‘Ciprel’ gas-fired power plant in Cote d’Ivoire. Siemens is a partner in Malta’s operational LNG/power venture.
There is, however, an element of counting chickens before they have hatched.
Half the up-to-2.8mn mt/yr planned output from the Fortuna FLNG, offshore Equatorial Guinea, which has yet to secure financing, is earmarked to trader Gunvor for ten years, but the other half is earmarked for regional trade – such as maybe Ghana or Togo if developed.
While Equatorial Guinea and foreign partners co-own the existing 3.7mn mt/yr EGLNG onshore export plant – which has the option of extending, revising or terminating in 2024 an existing 3.4mn mt/yr supply deal to Shell – the plans to develop the country’s second project (Fortuna) are in doubt, and the gas might go to the mainland.
Fortuna, a floating liquefaction scheme, since mid-2016 has missed several deadlines to take a final investment decision (FID). Equatoguinean energy minister Gabriel Obiang Lima May 10 said that unless Fortuna operator Ophir Energy takes FID by end-2018, it may either lose operatorship or else the project be scrapped.
On May 31, it was disclosed that Schlumberger will exit a joint venture (OneLNG) with Golar LNG that was to have partnered Ophir on its $2.1bn project, adding to Fortuna’s misfortunes. Both Ophir and Golar however said May 31 they remain committed to developing the venture. First LNG is expected in 2022, if FID goes ahead.
Mark Smedley, with input on Togo from Olivier de Souza