Exclusive: FID on Nigeria’s $5b floating LNG project slips again to 4Q 2023

By David Whitehouse

Posted on Thursday, 24 November 2022 10:20
Floating LNG vessels cut out the need for pipelines. REUTERS/Ints Kalnins

The timetable for a final investment decision (FID) by UTM Offshore on Nigeria’s first floating liquefied natural gas (FLNG) project has slipped again to the fourth quarter of 2023, CEO Julius Rone tells the Africa Report.

Rone in December 2021 said that the decision would be taken in the fourth quarter of 2022, and in June this year said that it had been pushed back to the second quarter of 2023. The delay, Rone says, is due to negotiations with France’s Technip over the engineering design contract, which cost four or five months. UTM, Technip, Japan’s JGC Corporation and Kellogg Brown & Root signed the engineering contract this month.

The FLNG vessel will be deployed on a block controlled by ExxonMobil and Nigerian National Petroleum Corp. The delay hasn’t had a financial impact and the facility can still be completed as scheduled in 2026, with first gas due in 2027, Rone says. The African Export-Import Bank (Afreximbank) has secured the $5bn of debt and equity funding needed for the project, which is now oversubscribed, he adds.

The EU imports 14% of total LNG supplies from Nigeria, and the European Commission has said there is potential to more than double this.

  • UTM, says Rone, is “working aggressively to keep to the schedule.” The Russia-Ukraine war means “this is the right time” for FLNG development.
  • Privately owned UTM Offshore, Rone adds, is open to prospective investors.

Environmental footprint

The world’s need for new energy sources is triggering a surge of interest in FLNG. The first FLNG project offshore Africa is the Coral South facility offshore Mozambique. According to a report this month, Angola’s state oil company Sonangol is exploring the deployment of FLNG in its waters. The global FLNG market will grow at a compound annual growth rate of 20% to 2032, according to research from Visiongain.

FLNG vessels are versatile and can be moved as development opportunities arise. The technology is billed as having a lower environmental impact than conventional offshore LNG plants because they avoid the need for pipelines, dredging, jetty construction or an onshore LNG processing plant.

Processing and liquefaction takes place onboard the vessel before the LNG is offloaded to tankers for transportation. The main drawback is that production depends on the facility’s ability to withstand wave and wind pressure.

The UTM facility will have annual production capacity of 1.2m tons a year and storage capacity of 200,000 cubic metres. An offtake agreement has been signed with Vitol, and 200,000 tonnes a year of liquefied petroleum gas (LPG) will be supplied to the domestic Nigerian market.

Nigeria has 209 trillion cubic feet of proven gas resources, and aims to use them to diversify away from being an exporter of crude oil. Progress has been hampered by poor infrastructure, and pipeline theft and vandalism. Nigeria LNG declared force majeure in October as flooding disrupted supply.

Bottom line

Rival LNG suppliers and the renewable energy industries won’t wait for Nigeria if it is unable to quickly mobilise its reserves.

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