Mega floating gas platforms way forward for Africa

The Golar Eskimo (R) takes on LNG from a tanker. The use of floating gas facilities in Africa is set to expand. Bloomberg

Floating gas platforms are the latest technology being embraced by energy-hungry African countries, an advancement that could unlock previously uneconomical resource deposits up and down the continental coastline.

Traditionally gas has been at the bottom of the list of African resources, either ignored or even flared off as an inconvenient by-product of oil. The cost of extracting, storing and transporting it were seen as too high. Besides, Africa was proving rich in oil, a far easier commodity to monetise.

This has now changed, in part due to the way in which gas itself is being packaged. Usually, undersea gas is sourced from a well, then transported via undersea pipelines to a storage facility on the coast. South Africa’s largest offshore gas deposit the Ibhubesi field, for instance, lies more than 100 kilometres offshore.

Development of Ibhubesi has been delayed in part because of the cost, which had been estimated at around $4 billion. Now, the economics of offshore gas projects like this are rapidly changing.

“Offshore floating natural gas [FLNG] is becoming increasingly attractive compared to building an onshore plant,” says Suba Sivandran, capability and strategy director for critical infrastructure at BMT, a UK engineering company that is one of the pioneers of the technology.

“Some key advantages are lower cost, earlier production, overcoming development issues and vessel leasing options.”

Mr Sivandran says global capital expenditure on floating gas platforms is projected to exceed $50bn over the coming half decade. About $42bn of this amount is earmarked for gas liquefaction ships. Gas will be harvested from the ocean, processed on board and then transferred to transport ships. The ships could be supplied by pipelines from the mainland. But with these mega-ships, offshore LNG can be processed on site.

“This investment will lead to the installation of 15 floating gas vessels globally, many of which are planned for the African continent.”

The world's first completed FLNG production facility is the FLNG Satu located in Kanowit gasfield off the shore of Sarawak in Malaysia, which started operations in 2016 and  and is owned by Petronas. Shell started building the world's second floating LNG facility in 2013. FLNG Prelude weighs in at 600,000 tonnes, which is six times the weight of the world's largest aircraft carrier. Prelude, a "floating liquefied natural gas facility" is 1,600 feet long and 243 feet wide. That makes it the biggest ship in the world, according to the BBC.

As a floating natural gas facility, it is anchored off the coast of Western Australia for 25 years, acting more like a platform than a mobile vessel.  The ship is anchored to the sea floor with a 93-metre-tall turret while it processes 175 Olympic swimming pools' worth of liquid natural gas year-round.

On December 25 last year, Shell announced that the wells had been opened at the Prelude.

"Prelude now enters start-up, ramp-up, which is the initial phase of production where gas and condensate is produced and is moved through the facility. Once this has concluded the facility will be stabilised for reliable production of LPG and LNG," Shell said.

Using such ships, potential gas projects in Africa will no longer be constrained by having to carry the cost and risk of getting the commodity to the shore. Instead, a floating platform will be used to pump it out, and directly into a waiting ship, from where it can be transported anywhere in the world.

In September this year Rome-based ENI announced construction had begun on a FLNG vessel that will be used to service its Coral field, off the coast of Mozambique. The Coral field, discovered in May 2012, contains approximately 16 trillion cubic feet of gas.

"The decision to use an FLNG vessel to develop the Coral field is based on the properties and location of the field itself," an ENI spokesman tells The National.

The Coral field lies in water depths ranging between 1,500m and 2,300m, approximately 55km offshore. The combination of depth and distance make conventional pipelines costly to install and maintain, the spokesman says.

“FLNG technology is suitable when transporting gas to land is problematic because of the distance from the coast or the nature of the sea bed. At the same time, it requires deposits that can ensure a continuous supply for 25-30 years, as the Coral deposits will.”

The floating vessel itself will be equipped for receiving, processing and liquefaction of the produced gas.

Meanwhile, Bermuda based Golar LNG operates a fleet of gas-transport vessels. Last year Golar moored the Hilli Episeyo off the coast of Cameroon, where it is producing gas, after dispatching its first shipment to China in May.

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The vessel was not new – it was commissioned to transport liquid natural gas in 1975. Golar bought it and had it converted to process natural gas into liquid, saving time and money.

"The Hilli Episeyo is the world's first FLNG vessel that has been developed as a conversion project from an LNG carrier," says Stuart Buchanan, head of investor relations at Golar. "This conversion approach adds value through its accelerated time to first LNG production."

The success of the Hilli Episeyo means that Golar is now in the running as a contractor for the proposed Tortue project in the waters of Mauritania and Senegal, which is being put forward by Kosmos Energy and BP.

Some argue that bypassing on shore storage and processing cuts off jobs and industrial benefits that African countries may derive from having LNG plants on their coastlines. No doubt there is some truth to this. However, for now, gas producers are embracing a technology that allows them to bring to market gas deposits that would otherwise be left where they are.

Crucially, FLNG opens the viability of "stranded" deposits – isolated pockets of offshore gas that are not otherwise economically exploited, says Mr Sivandran.

“This is especially true for Africa where at present it is considered the “hot spot“ for floating LNG within the industry. The fast-track method of getting gas to market via FLNG significantly reduces the time from exploration to export and is luring investment in offshore gas fields from a range of major oil and gas operators.”

Despite the increased appetite for gas in Africa, oil is still a major draw. Total said on Wednesday it had started production from the Egina oilfield off Nigeria's coast, part of a shift by the French energy firm towards deepwater oil and gas projects to its drive cashflow.

Output from Egina, which is located in waters about 5,250ft deep, is expected to plateau at 200,000 barrels per day of oil, Total said. That rate is equivalent to about 10 per cent of Nigeria's current production.

"Egina will significantly boost the group's production and cashflow from 2019 onwards, and benefit from our strong cost reduction efforts in Nigeria where we have reduced our operating costs by 40 per cent over the last four years," Total's head of exploration and production, Arnaud Breuillac, said.

Total is betting on profitable deepwater oil and gas fields in Sub-Saharan Africa, Brazil and the US Gulf area. In Africa, the company is ramping up deepwater projects in the Republic of Congo and Angola.

Total forecasts output from deepwater projects will reach 500,000 barrels of oil equivalent per day by 2020 and account for more than 35 per cent of cashflow in coming years, compared with about 15 per cent now, according to Reuters.

The energy major also said it would take a decision this year on whether to invest in developing the Preowei field, located in the same block as the Egina field.

Total has for almost a decade been extracting oil from a third field in the block, Akpo. It holds a 24 per cent stake in the block's lease and is the operator. Its partners are state-owned Nigerian National Petroleum, China's CNOOC, Brazil's Petrobras and private Nigerian firm Sapetro.

The French company is one of the strongest players in African oil, holding the largest proven reserves on the continent among the world's top oil companies.