Italian energy firm ENI has signed a US$8 billion deal to develop the Coral South gasfield off Mozambique, giving a green light to the long-awaited, 3.4 million tonne a year (mta) floating LNG project Coral FLNG.
Production will start in 2022 and the entire 3.4 mta output is contracted to BP. South Korea-based Samsung Heavy Industries (SHI) will build the specialist floating production vessel, a contract said to be worth US$2.5 billion. The east African project is billed as the world’s first ultra-deepwater floating LNG project.
Wood Mackenzie research manager southern and east Africa Alasdair Reid said: “Using a vessel to liquefy gas offshore will allow the partners to realise cashflow from Mozambique earlier.
“The project will generate annual gross revenues of over US$1.5 billion a year before tax for 25 years, utilising 4.7 trillion ft³ of gas over its lifetime. With the final investment decision out of the way, the project is now on track for first LNG production in 2022.”
Coral FLNG is the first new production project to reach a final investment decision so far this year. It could drive shipowners back to the shipyards, ending a long, dry spell for fresh LNG-carrier orders. Mitsui OSK director Takeshi Hashimoto told LNG World Shipping earlier this year that the Mozambique project will need 15-20 LNG carriers to deliver the cargoes to market.
Wood Mackenzie expects West Africa’s Fortuna LNG FLNG project to get the go-ahead soon. “LNG project sanctions over the last two years have been few and far between,” it said.
“This reflects the prevailing oversupply in the LNG market. However, the only two projects we expected to be sanctioned this year, Coral and Fortuna, are both floating LNG. This highlights a positive shift in industry perception toward the FLNG concept.
“Majors Eni, Shell, Exxon and recently BP have all now endorsed the floating LNG concept. With stranded gas resources suited to FLNG elsewhere in Africa, Mozambique offers Eni an ideal regime to test this new approach.”