African FLNG Might Disrupt Global Gas Trade



African FLNG Might Disrupt Global Gas Trade
Lower costs, greater speed, and ability to simply disengage for new waters, make FLNG an attractive option in Africa.

Off the coast of Mauritania and Senegal, Cameroon, Congo Brazzaville and Mozambique, four floating liquid natural gas (FLNG) liquefaction plants will be in operation by 2022, in readiness to process new supplies of African natural gas. Compared with onshore liquefaction facilities, FLNG liquefaction plants are cheaper and faster to construct, as they are typically based on converted oil tankers with the equipment needed to process and super-cool gas raised from subsea wells, ready for loading into LNG tankers.

FLNG Advantages

The key advantages of most floating LNG liquefaction plants over onshore plants are cost, greater speed, and smaller scale. The typical FLNG is a refitted oil tanker costing as little as US$1.2bn compared to an onshore LNG plant, which costs at least $4 billion and takes 4-5 years to construct. Smaller in scale than onshore plants, FLNG can commercialize small-to-medium size gas reserves. Lower costs, greater speed, and ability to simply disengage for new waters, make FLNG an attractive option in Africa, where commercial risk linked to the political environment is moderate to high.

Africa’s onshore LNG export projects have struggled to secure the long-term, oil price linked off-take contracts with strong credit-worthy buyers who are key to attracting the necessary capital from investors and banks. African LNG output is predicted to double from 40 million tons a year today to 80 million tons by 2030 according to Bloomberg New Energy Finance. Consequently,  “Africa is the hot spot for floating LNG” as noted by Lucas Schmitt,  senior gas analyst at consultants Wood Mackenzie Ltd .

FLNG Markets

FLNG plants are suited to satisfying the needs of LNG traders and small LNG-to-power projects on the continent of Africa including Ghana, Ivory Coast, South Africa and Kenya as well as small markets like Malta, Bali, and Bahrain. The location of Africa’s FLNG vessels on the west and east coast also favor markets in Asia, Latin America, the Caribbean and Europe. African FLNG could also provide top-up supplies for the expected increase in gas peaking plants in countries with increasing dependence on renewable energy and meet growing seasonal market demand. According to the IEA, global demand for LNG could rise from 400 billion cubic metres (bcm) today to 600 bcm by 2027 based largely on traditional purchasers in Europe, Asia and developing nations in Africa.

Africa’s FLNG projects

Energy majors including BP, Perenco and ENI  have, or are developing FLNG plants in Africa, as a cost-effective means of exploiting small to medium-sized offshore gas fields. Africa’s first FLNG came onstream in June 2018 for Perenco’s Cameroon development. FLNG vessels are under consideration for BP’s joint Mauritanian and Senegalese offshore development, whilst ENI and partners proposed a $7 billion FLNG plant for their Coral South field in Mozambique. Currently, State China National Offshore Oil Corporation is considering a 15 year offtake agreement to buy 1 million tons of LNG a year from a floating liquefaction plant off Congo Brazzaville.

FLNG challenges

FLNG projects are not straightforward as Schmitt notes: “developing a floating LNG project is problematic, as it needs to find the right partners and sponsors, able to offer the right financing and technological knowledge and capacity in order for it to be bankable." In some cases, potential African partners are unable to meet their financial obligations.

As latecomers, African LNG export projects face competition from mega exporters Australia, Qatar, and newer suppliers Russia and North America. These major LNG exporters are investing billions to boost capacity to meet future growth in demand. Worldwide, there are some two dozen FLNG projects awaiting final investment decisions this year.

Competition could restrain Africa’s LNG export potential but, as Schmitt points out, Africa “will gain in importance, given its strategic location between the Atlantic and Pacific basins.”



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