All posts tagged GAS MONETISATION

An Opinion piece, By Gerard Kreeft

On 23 November 2022, the President of Mozambique, Filipe Jacinto Nyusi, visited and inaugurated the Coral-Sul Floating Liquefied Natural Gas FLNG facility. The event was attended by Carlos Zacarias, the country’s Minister of Mineral Resources and Energy and other government representatives. ENI’s delegation at the commissioning was led by Guido Brusco, Chief Operating Officer Natural Resources.  The event took place after the shipment of the first LNG cargo on 13 November from Coral Sul FLNG.

The inauguration of ENI operated Coral Sul FLNG project in Area 4 acreage offshore Mozambique deserves special attention. This focus is due at a time when the two of the country’s most highly touted LNG projects—Rovuma and Mozambique LNG– continue to be on security hold.

While LNG markets throughout 2022 and most likely in 2023 are scrambling to meet European and global gas demands, there has been radio silence on two of Africa’s most touted LNG projects located in Mozambique: Rovuma owned by a consortium consisting of ExxonMobil, ENI, China National Petroleum Company, Galp, Kogas and ENH; and Mozambique LNG owned by TOTALEnergies, Mitsui Group, ENH, ONGC, Bharat Petroleum, PTTEP, and Oil India.

Because of the security situation in the north of Cabo Delgado province, both projects have been at a standstill since 2021. In February 2023 TOTALEnergies sent an independent mission to Mozambique to evaluate the security status. The key question: will both TOTALEnergies and ExxonMobil resume their potential projects in the short-term?

Security clearance aside, a number of hurdles remain.

The TOTALEnergies project took Final Investment Decision in 2019. The ExxonMobil led project withheld its FID and has not taken that decision. Even if TOTAL returns to the project in 2023-2024 the earliest delivery of LNG would be 2027-2028, based on past project planning scenarios. We have no idea when ExxonMobil will take FID.  What we know is that the LNG global marketplace is shifting and could provide the Mozambique project planners some additional headaches.

LNG’s Present Situation

In its recent Global LNG Outlook 20230-2027, the Institute for Energy Economics and Financial Analysis (IEEFA) provides a somewhat sobering picture for new LNG projects. The institute  “expects that sustained high global LNG prices; weak LNG demand growth and elevated price sensitivity in Asia; declines in gas consumption in Europe; and a multi-year string of global capital investments in cost-competitive energy alternatives will undermine global LNG demand growth over the next several years.”

According to IEEFA the global demand for LNG is slowing:

Europe, although maintaining a high degree of importing LNG is also increasing  energy efficiency measures and wind and solar projects have become commonplace;

Japan and Korea, historically dependable LNG importers, are increasingly turning to nuclear, and renewables;

China decreased its LNG imports by 20% in 2022 and is turning to pipeline gas supplied by Russia as well as domestic gas supplies;

South Asia, including India, Pakistan, and Bangladesh slashed purchases by 16% in 2022 and suppliers often defaulted on contracts to obtain higher prices elsewhere.

“After several years of weak supply growth, IEEFA anticipates that the global LNG market will see a tidal wave of new projects come online starting in mid-2025. The wave will likely crest in 2026, with the addition of 64Million metric tonnes of annual (64MMTPA) liquefaction capacity—the most in the history of the global LNG industry. The supply additions will boost global liquefaction capacity by roughly 13% in a single year. Liquefaction projects targeting in-service after 2026 may be entering a much smaller demand pool than bullish market forecasts anticipate. As new supply floods the market, today’s tight markets may give way to a supply glut, with lower-than-anticipated prices, smaller netbacks, tighter margins, and lower profits for LNG exporters.”

According to IEEFA’s forecast in 2023 only 5.8MMTPA of liquefaction production will be developed, and in 2024 9.1MMTPA. Total LNG production capacity is currently 456MMTPA.

The turning point will be 2025.

“IEEFA anticipates that roughly 17MMTPA of liquefaction projects are likely to come online around the world in 2025—more than in 2023 and 2024 combined. New capacity additions will crest in 2026, with an estimated 64MMTPA of capacity coming online in a single year, and continue into 2027, when 37MMTPA of new capacity is expected to begin operating”.…

Much of the new production will come from Qatar, USA and Australia. If 2026 and 2027 will see a sharp upturn in LNG liquefaction production, how will this affect Mozambique’s two LNG projects which could potentially add 38.1MMTPA when fully functioning? Long term delays can only threaten project viability. And not proceeding sooner rather than later increases the chances of these projects being listed as stranded assets.

A more immediate threat is that of ENI’s Coral South project already in operation. BP has contracted the entire output of Coral Sul for 20 years, having signed a free on board (FOB) contract with the project partners. In July 2022, it was reported that ENI was considering the possibility of deploying a second floating liquefied natural gas vessel in Mozambique. What does this mean for Rovuma and Mozambique LNG?

The Players and their Strategies

ENI, ExxonMobil and TOTALEnergies have varying strategies. So, how they will potentially address their Mozambique LNG projects?

A key ENI strategy is developing a series of joint-ventures to ensure that ENI can achieve maximum leverage for its current oil and gas assets and at the same pursuing new strategies as part of its energy transition plan. A key example is Azule Energy, Angola, a 50-50 joint venture between ENI and BP formed in 2022 to include both companies’ upstream assets, LNG and solar business. Azule Energy is now Angola’s largest independent equity producer of oil and gas, holding 2Billion barrels equivalent of net resources and growing to about 250,000 barrels equivalent per day (BOEPD) of equity oil and gas production over the next 5 years. It holds stakes in 16 licences (of which 6 are exploration blocks) and a participation in Angola LNG JV. The company also participates in the New Gas Consortium(NGC), the first non-associated gas project in the country.

TOTALEnergies is currently testing the waters: in February 2023 Patrick Pouyanné, Chairman and CEO of TOTALEnergies, visited the Cabo Delgado province of Mozambique to review the security and humanitarian situation and evaluate the actions taken by Mozambique LNG.

ExxonMobil has in the past followed the security precedents of TOTALEnergies and will no doubt do this again. That ExxonMobil is a partner in the Coral South project could strengthen its bargaining hand.

That LNG plays a pivotal role in the energy transition for both ExxonMobil and TOTALEnergies is beyond dispute.

ENI’s pole position that the company has with its Coral South project cannot be underestimated. And with Rovuma and Mozambique LNG scheduled to come on stream possibly in 2027, with a weakened global demand for LNG, both ExxonMobil and TOTALEnergies may have to go cap-in-hand to ENI to discuss possible project options. Finally, do not forget that the Government of Mozambique will seek an orderly development of its LNG resources. Certainly, a story of musical chairs in the make.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report and is a guest contributor to IEEFA(Institute for Energy Economics and Financial Analysis) based in Cleveland, Ohio, USA. His book ‘The 10 Commandments of the Energy Transition ‘is on sale at https://books.friesenpress.com/store/title/119734000211674846/Gerard-Kreeft-The-10-Commandments-of-the-Energy-Transition

Norwegian operator BW Energy, has reported the most far-fetched advancement in the development of Kudu gas field offshore Namibia in the last five years.

The company says it signed, earlier in February 2023, an Engagement Protocol with the local power company NamPower Corp. BWE also says it has made significant progress in understanding the complicated Kudu gas reservoir system, consisting of aeolian sands and volcanics, a factor which has challenged the field’s development fifty years after discovery.

The Engagement Protocol covers the project feasibility process and a term sheet for the Power Purchase Agreement and plan for final negotiations. The timing of final sanction Kudu gas-to-power development is subject to realising a project financing solution as well as negotiating power sales agreements.

“Two years of detailed subsurface work in Kudu has highlighted potential additional gas resources and shallower oil targets, of which the latter have been de-risked by recent discoveries in Namibia”, the operator explains. “BW Energy is currently acquiring a modern three dimensional (3D) seismic, gravity and magnetic dataset over the license This will further enhance the depositional model, de-risk additional upside targets, and provide better data to support FEED programmes in addition to potential future farm-in discussions”.

By Prospectus Mojjido, in Abuja

The 614 kilometre Ajaokuta to Abuja to Kano (AKK) gas pipeline in Nigeria is 43% completed.

Construction of the two sections of the line, ground broken in 2020, have been interrupted by insurgency, kidnapping, community challenges over right of way, as well as the chronically inept logistics overview that usually attends any project superintended by the NNPC Ltd, Nigeria’s state hydrocarbon firm.

But the project is ongoing, despite widespread misgivings that it had been scuppered by the decision by China to pull out the funding.

The NNPC has essentially funded the project since the Chinese left.

AKK’s objective is to pump natural gas from Niger Delta fields entering Ajaokuta from Oben, in Nigeria’s mid-west, to Kano in the north of the country. There is also the probability that the gas will continue from Kano to Algeria, en route to Europe in a subsequent project named Trans Sahara Gas Pipeline. That subsequent project is not anywhere yet in concrete form.

The AKK emerged as part of the National Gas Master Plan, approved in 2008, which envisaged connection of the gas networks in the western and eastern parts of the country, building new transport pipelines from the south to Ajaokuta Steel, on to Abuja and then to the northernmost reaches of the country. The first part of the infrastructure required the construction of Central Processing Facilities (CPFs) in the Niger Delta region to process wet gas for supply to onshore gas transportation networks and industrial plants.

Although it has taken over two years since the groundbreaking to get to 43% stage, the harmonised schedule between NNPC and the two contractors constructing the facility, is end of 2023. “I can’t let my mind imagine anything outside 2023”, one contractor tells Africa Oil+Gas Report. “The focus helps”. The NNPC Ltd, as a rule, doesn’t respond to interview request by AOGR. This is a developing story.

By Foluso Ogunsan

Chevron and ExxonMobil are still exporting Nigerian produced LPG

Nigeria exported 700,000Tonnes of Liquefied Petroleum Gas (LPG) in 2022, even as it grappled with inadequate local production to satiate domestic demand.

The country consumed 1.4Million Tonnes in the year, out of which 800,000Tonnes were imported, according to data by the Nigeria Midstream Downstream Petroleum Regulatory Agency (NMDPRA).

Only 600,000Tonnes of the 1,4Million Tonnes consumed, was locally produced, NMDPRA says.

As the government scrambles for more domestic LPG output to meet its target demand of 3Million Tonnes for 2023, the question is “why export all that LPG only to import more of the same products”?

One answer is that most of what is locally consumed is Butane, while the variant of LPG that is exported is Propane. The 700,000Tonnes of Propane exports left the country from processing plants run by Chevron and ExxonMobil.

Nigerian authorities aim to reduce all LPG exports to the barest minimum.  “We now need those volumes for sure” says Dayo Adesina, Programme Manager, National LPG Expansion Implementation Plan in the office of the Vice President. “Even the Propane is needed for Autogas, power generation and other sources of energy. Obviously, butane is for cooking”.

Local producers of LPG (in 2022) included Nigeria Liquefied Natural Gas (NLNG) Ltd ( ~350,000Tonnes Per Year), Kwale Hydrocarbon Nigeria Limited, KHNL, a subsidiary of  Sterling Oil Exploration & Energy Production Co. Ltd (~150,000Tonnes Per Year), NNPC E& P Ltd (Intermittent production from the Oredo field integrated gas plant), Platform Petroleum, (~20,000Tonnes Per Year from Egbaoma gas plant).

Adesina: “We need to know what you’re ready to do, what your challenges are, where we can intervene”

Talks are ongoing with Chevron and ExxonMobil on the modalities of retaining all LPG volumes in country. “It Is the Minister of Petroleum Resources that represents the federal government and I guess the joint venture partner in NNPC Limited as well”, Adesina explains, disclosing that one of the companies was “ready to free up 34,000Tonnes a month, (meaning 408,000Tonnes a year), but then the specification (to convert from Propane to Butane), you need to have a splitter on the receiving end”.

Adesina, himself a keen player in the LPG market and a former president of the Nigerian LPG Association, invited stakeholders for a round table discussion on midstream processing of gas on February 9, 2023. His guests included representatives from some E&P companies, including Seplat Energies, Heirs Holdings, Pillar Oil and First E&P; all of whom he challenged to either include LPG in their (planned or ongoing) gas production mix or boost its production in the mix;  NLNG Ltd;   Standard Chartered Bank and Africa Development Bank AfDB), two ranking financiers  who he sought to convince to put more investment into LPG production;  NMDPRA – the regulatory agency focused on LPG market opportunity whose representatives were there to clarify regulatory issues and explain government’s goals; a host of energy consultants including  Argus and Energy Culture as well as a Climate Accelerator expert.  At the session were two representatives of the Nigerian Bureau of Statistics, one of who canvassed vigorous arguments about incentives for choice of butane over kerosene.

Adesina told his guests: “By the time we leave here we should be able to say we have agreed on a Million Tonnes, 2Million Tonnes, half a Million tonnes, less or more over what we are producing now. We need to know what you’re ready to do, what your challenges are, where we can intervene, who we can bring forward. Anybody we need to bring we can bring; that’s the advantage of government. We know that foreign exchange is a problem, some agencies are also a problem too”.

The facility, to be part financed by AFC, will process raw gas with natural gas liquids (NGLs) being fractionated into pure components like propane, butane, pentane and stabilized condensate components from the Jubilee and TEN Fields.

Ghana National Gas Company (Ghana Gas) has finally gotten on course of implementing a decade old plan to double its gas processing capacity from 150Million standard cubic feet per day 150MMscf/d to 300MMscf/d.

On February 3, 2023, it signed a Project Implementation Agreement with its joint venture partners to construct a second Gas Processing Plant (GPP Train 2) at an estimated cost of $700Million.

The gas plant would be sited right next to the first train at Atuabo, in the Ellembele District of the Western Region and is expected to be completed within 24 months.

Benjamin K. D. Asante, the Chief Executive Officer (CEO) of the GNGC, initialed for the Ghana Gas while Hilton John Mitchell, a representative of the Consortium, comprising the Integrated Logistics Bureau Limited, Jonmoore International, Phoenix Park Limited and African Finance Corporation, signed for the rest of the partners.

The construction of a second train gas processing plant with a nominal capacity of 150 million standard cubic feet per day (MMscfd), expandable to 300 MMscfd, to process incremental raw gas volumes from the Greater Jubilee and TEN fields.

The project is part of the GNGC’s strategic development plan and expected to increase the national gas processing capacity to 450 MMscfd.

The new gas processing facility will process raw gas with natural gas liquids (NGLs) being fractionated into pure components like propane, butane, pentane and stabilised condensate components from the Jubilee and TEN Fields.

The lean gas containing methane and ethane shall be tied into the lean gas export from existing GPP Train 1 and delivered into the onshore export pipes.

Some of the components of the GPP Train 2 include the construction of a 150 MMscfd capacity processing plant, expandable to 300 MMscfd, a storage facility, an additional compressor package at Atuabo Mainline Compressor Station and provision of utilities and liquid waste treatment system.

GPP Train 2 is expected improve the output of liquids processed from natural gas to 80% compared to the existing facility, which produced between 40 and 50% of gas liquids.

The Ghana National Gas Company was established in July 2011 as a limited liability company with the responsibility to build, own and operate natural gas infrastructure required for gathering, processing, transportation and marketing of gas.