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The future of the Equatorial Guinean (EG) LNG facility on Bioko
Island seemed in doubt over 2018, however into 2019 there has been
a reversal of fortune. In the near-term, feedstock stability has
been secured with the recent final investment decision (FID) taken
for the Alen Gas Hub. The development of the Alen Gas Hub has
unlocked further potential gas supply in and around Blocks O &
I. The development of these reserves is however uncertain given
recent announcements from the government of a potential tieback of
the re-invigorated Fortuna project. Consequently, the EG LNG
facility is now awash with potential medium to long-term feedstock
options.
The EG LNG plant, located offshore, north of Bioko Island, is
currently supplied from a single field, Alba,
whose production is forecasted to begin to decline in 2020 - 2021.
To support continued supply to the liquefaction facility, Marathon
Oil, the plant's operator, has agreed with the government to
process third-party resources and is seeking to secure further
feedstock supply. As part of this, additional supply was secured in
April 2019, with an agreement signed between Noble Energy and the
government of Equatorial Guinea for supply from the Alen field. The
Alen field has been producing condensate since 2013 with gas
injection utilized for pressure maintenance. Noble Energy has
decided to commercialize the gas and is aiming to begin gas
production in 2021. The project took FID in April 2019 and the
contract for the construction of the 950 million standard cubic
feet per day (MMscf/d) export pipeline to EG LNG was awarded to
Saipem. This will help maintain feedstock to the EG LNG facility
until the mid-2020s but longer-term supply stability is still
uncertain.
Figure 1: Equatorial Guinea LNG feedstock sources within
tie-back distance to the Equatorial Guinea LNG facility.
Several feedstock sources available in the
region
The large capacity gas export pipeline between the Alen
facilities and EG LNG had aimed to support the commercialization of
further gas reserves from Block O & I. This includes the
Aseng, Diega, Felicita, Carmen and Carla fields.
All fields are within 5 to 10kms of the Alen production facility
and can be developed utilizing low cost tieback scenarios.
Combined, the gas reserves from Block O&I could sustain
production through to the early 2030s, should they be brought on
stream in the mid-2020s, once spare capacity is available. The
Aseng field has been producing oil since 2011 with gas injection
for pressure maintenance. For gas to be produced, minimal to no
drilling will be required as existing wells can be converted into
gas producers. Diega, Felicita and Carmen are currently under
appraisal, with further studies required to define the best
development scenario. These assets have robust forecasted economics
of approximately 1.5 USD per thousand standard cubic feet in IHS Markit Vantage. Their
economics could further improve through operational and cost
synergies if field developments were combined.
An additional source of gas could be supplied by the
Yoyo/Yolanda field which is located 15 kms east of
Blocks 0 & I, straddling the border between Equatorial Guinea
and Cameroon. The two governments are currently negotiating a joint
development of the two fields. The government of Equatorial Guinea
is said to be aiming for a joint development whereby gas will be
exported to the EG LNG and condensate to a local refinery in
Cameroon. The planned Alen export pipeline has sufficient capacity
to support supply from both Blocks O & I as well as from
Yoyo/Yolanda.
Another area which has the potential to supply feedstock gas to
the EG LNG plant is the Greater Alba area and
associated blocks. These blocks are hosts to the Langosta,
Gardenia, Agate, Bococo, Estrella and Luba East fields. All fields
are small to medium size discoveries, some of which are under
appraisal. Combined, the gas reserves of these fields are estimated
to be between 500 and 650 Bscf. All of these fields are within a
short tie-back distance from the nearby Alba platform, from which
production could be exported via the existing Alba trunk line to EG
LNG. All six fields are estimated to have marginal economics as
standalone developments but could be improved substantially, if
developed together.
Fortuna and the potential competition for processing
capacity
While there seems to be sufficient long-term future feedstock
for the single train liquefaction facility at EG LNG, recent
Government announcements have indicated that the newly invigorated
Fortuna development could also be developed as a tieback to the EG
LNG facility. The Fortuna project, located in Block EG-27
(previously Block R), was awarded to Lukoil during the 2019
Equatorial Guinea Bid Round. Fortuna was
originally operated by Ophir up until December 2018. The government
refused to extend the producing contract following the failure of
the company to secure project funding. Ophir had previously
announced the plan to develop the field utilizing FLNG
technologies, however, the development had been stalled for years
due to the fields stranded location and the lack of financing for
the project. Although historically delayed, indications from the
new operator are that the development concept for Fortuna may be
finalized in early 2020. If developed as a tieback, the project
faces both technical and financial challenges. The ultra-deep
waters plus high maintenance and inspection cost required to keep
the 140km long pipeline operational could limit the economic
viability of the development as a tieback project.
Figure 2: EG LNG Gas Processing Feedstock
In recognition of Equatorial Guinea's gas potential, a strategic
partnership and cooperation agreement was signed between the
Equatorial Guinea government and Vitol group in late 2019. It is
aimed at developing a gas megahub on Bioko island in the vicinity
of the EG LNG plant. Information in the public domain indicates the
construction of several offshore gas processing centres. The most
preferable development would be an additional LNG train at EG LNG
to allow for the simultaneous development of both the Fortuna and
Block I & O reserves. Given the current oversupplied global LNG
market this is unlikely to take place in the 2020s. Consequently,
the development of Fortuna and reserves in and around Block O &
I are possibly in direct competition to secure medium to long-term
capacity at the EG LNG facility.
Rebekah Bostan, Africa Regional Lead Vantage, is an
expert in supply and demand fundamentals, in particular in relation
to upstream asset evaluation and economics at IHS Markit. Ismini Katsimpardi is a Senior Technical Analyst
focusing on the valuation of upstream assets in Africa at IHS
Markit.