Africa rides wave of floating LNG tech

Africa is at the forefront of a global surge in new floating gas facilities as countries on the continent seek to meet strong demand in Europe as quickly and cheaply as possible, analysts and energy companies say.

Eni, BP and smaller independent players such as Nigeria’s UTM Offshore are driving the surge with projects on Africa’s east and west coasts.

Floating liquefied natural gas (FLNG) vessels shipped Mozambique’s first-ever gas exports last November, and the Republic of the Congo is preparing for its first LNG exports in December.

Africa currently exports 40Mt of gas a year, and Westwood Global Energy group expects the continent to add 10.2Mt a year in new FLNG capacity by 2027, with projects in Mozambique, Nigeria, Senegal, Mauritania and Republic of the Congo.

“We believe FLNG will be a nice tool of developing gas in a quicker and more efficient way,” said Luca Vignati, Eni’s upstream director.

Over the next five years Westwood forecasts $13bn (about R247bn) in spending on FLNG, with Africa accounting for just under 60% of the 18.3Mt a year of added FLNG capacity by 2027. It expects a further 36.5Mt a year to start up after 2027 valued at $22bn.

FLNG facilities are ships that can pump, liquefy, store and export gas directly from offshore fields. They bypass extensive — and costly — infrastructure needed to process gas onshore, and keep a distance from communities who often protest against having projects nearby.

Operators, energy companies and bankers say improvements in vessel technology and turnaround times have hastened demand since Shell built the world’s first FLNG vessel, the Prelude. Anchored off Australia, it started delivering LNG four years ago.

“A typical FLNG can be done for a fraction of the cost of a traditional [LNG production] train,” said Fola Fagbule, senior vice-president with the African Finance Corp (AFC), which has helped fund FLNG projects in Africa.

Illustrating potential savings, one analyst said capex costs for Cameroon’s Golar FLNG facility, a repurposed vessel, could be as low as $550 a ton, compared with  $900-$1,100 for a new onshore terminal on the US Gulf Coast.

Despite the record prices recorded since Russia’s invasion of Ukraine, Africa has struggled to pump its gas because of reduced fossil-fuel financing due to the energy transition focus.

The energy transition has also made investors cautious about multibillion-dollar projects with investment cycles of between 20 and 30 years. FLNG has a quicker turnaround, with Eni targeting new-build ships to produce just four years after investment.

“You don't need to have a 25-year plateau for huge reserves. You may be there for five or 10 years, and then you move to the next field, and this is the flexibility we want,” Eni’s Vignati said.

Africa currently has more than 50% of the world’s FLNG capacity. Adding to their appeal, the offshore ships also bypass safety issues, such as those that delayed TotalEnergies’ $20bn Afungi terminal in northern Mozambique.

“Africa is the centre right now ... and it’s going to grow,” said Gavin Thompson, vice-chair research at Wood Mackenzie, on the sidelines of the Africa Energy Week conference in Cape Town.

“Interestingly, it’s not one single country or one single region; we are seeing [activity] around both East and West Africa,” he said. “They are competing against each other.”

The lower costs are also crucial. Wood Mackenzie data showed that the total amount of upstream capital expenditure across Africa is falling.

Eni is deploying two vessels, one repurposed and another larger new vessel, to the Republic of the Congo for a total expected output of 3Mt a year by 2025.

It also plans to make a final investment decision with its joint venture partners regarding a second 3.4Mt  FLNG project in Mozambique’s Rovuma Basin by June next year.

Bruno Itoua, hydrocarbons minister for the Republic of the Congo, told Africa Energy Week that its first exports would come by December. “It’s not only an investment opportunity but also an extraordinary chance to build a legacy,” he said.

Governments in Africa, some of which are in debt crises, are under pressure to rake in royalties and taxes while prices are hot.

Fagbule of the AFC said it was not unusual for governments to earmark some gas from FLNG facilities for domestic consumption, but that full-scale projects targeting domestic markets are tough to finance due to a limited number of customers able to pay.

“They see the demand for seaborne natural gas that can be delivered across the globe, and they are trying to get that as soon as possible,” he said.

Reuters