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Viktor Katona

Viktor Katona

Viktor Katona is an Group Physical Trader at MOL Group and Expert at the Russian International Affairs Council, currently based in Budapest. Disclaimer: views set…

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The Giant Floating LNG Project You’ve Never Heard Of

One of Africa’s brightest LNG prospects, Tortue FLNG is edging increasingly closer to its estimated commissioning date, 2022. It is one of the largest deepwater gas find of recent years – discovered in 2015, the field complex in total is estimated to contain 20 TCf of gas, of which the Tortue West field takes up around 15 Tcf. The feed for the LNG project, the Grand Tortue/Ahmeyim gas field straddles the border between Senegal and Mauretania, both countries heretofore largely irrelevant on the global LNG (or natural gas) map. It also represents one of those rare occasions when two developing nations have agreed to a fair and equitable distribution of resources, well, unless the departure of Kosmos Energy puts all the above in jeopardy.

The Tortue field will have four subsea wells at a depth of 2850 metres, tied back via an 80-km long pipeline to an FPSO vessel which would be located in shallow waters, and from there the marketable gas volumes would be sent a further 30km away to the FLNG vessel. The primary function of the FLNG would be to market the gas volumes abroad, however a pipeline connection to the shore is also envisaged to provide the two home states, Senegal and Mauretania, with some gas if need be (according to market rumors 10 percent was raised as a national gas market allocation threshold). Holding a 47.6 percent stake, BP is the operator of the complex, with Kosmos Energy owning 42.4 percent of the project and the two relevant national oil companies, the Mauretanian Société Mauritanienne des Hydrocarbures et de Patrimoine Minier (SMHPM) and the Senegalese Petrosen.

Following the December 2018 final investment decision, there has been quite a buzz around Tortue FLNG. The right to market all the first-phase Tortue FLNG volumes was allotted to BP Gas Marketing, which in turn struck an agreement with Golar LNG on a 20-year lease of the Gimi LNG tanker, to be converted into a FLNG vessel for an estimated cost of $1.3 billion. The subsea production system was awarded to BHGE, whilst the French TechnipFMC will be responsible for the engineering, procurement, construction, installation and commissioning of the FPSO, the vessel for which will be most likely built by the Chinese Cosco shipyard. Now, against this background, comes the rumor that Kosmos Energy seeks to bring its ownership in Tortue FLNG to about 10 percent or even quit the project altogether. Related: Scientists Find Oil-Eating Superbacteria On Bottom Of The Ocean

Kosmos’ intention is understandable and odd at the same time – after all, it was the Dallas-based firm that pioneered the appraisal of the Mauretanian deepwater offshore, having held three blocks there for seven years already. Kosmos was the one to discover the Tortue field in 2015. It was only in December 2016 that BP joined the project, after Chevron’s attempts to establish a foothold there yielded no palpable result. The reasons for leaving the project might be very much similar to the considerations that led Kosmos to the BP farm-out and be of primarily financial character. Kosmos would not be able to launch Tortue FLNG on its own (upstream development costs of some $6 billion) and perhaps it sees the pre-commissioning period as the best period when it can sell the asset.

If carried through, the decision is all the more interesting as Kosmos Energy is looking forward to exciting developments on another MSGBC hotspot, the Yakaar field, several dozen kilometers to the south of Tortue. The Yakaar wildcat, drilled in the spring of 2017 to a total depth of almost 5km, discovered a net pay of 45 meters, estimated to contain up to 15 TCf of natural gas. Now BP has brought the Ensco Ds-12 drillship into Senegalese waters to drill firm wells at the Yakaar field. Since the field is not a transborder one, it should most likely compel the shareholders to go for another LNG hub, remains to be seen whether an onshore or offshore one.

Yakaar is operated by Kosmos BP Senegal (50.01 percent Kosmos, 49.99 percent BP), having a 65 percent stake, whilst BP also has a standalone stake of 25 percent, giving the British major the potential chance to own up to 90 percent of the project should it decide to buy out Kosmos. Yet it has to be pointed out that the arrival of a new, potentially heavy-weight, partner might widen the maneuvering possibilities of the project. It was initially expected that Tortue FLNG will see another FLNG added some 2-3 years after the startup of Phase I or the shareholders might even opt to construct an onshore liquefaction plant. In this, the entry of LNG-positive majors like Shell, ENI or Rosneft recently, might be of tremendous help. Related: Oil Could Fall To $40 If OPEC Abandons Its Deal

Generally, if Kosmos leaves in a somewhat messy situation, it would be indubitably bad news for both Mauretania and Senegal. First of all, Tortue FLNG is a ground-breaking development for Africa in that two nations decided to launch a cross-border project instead of the usual way of settling these things, decade-long contention. Both have decided to fast-track the project despite having no official border delineation agreement, a rare sign of trust and constructive approach. A lengthy vacuum in the ownership structure might compel the Mauretanian and Senegalese national oil companies to demand a larger share of the pie, which would render the operation and financing much more burdensome and would slow down Tortue LNG’s development.

Since Tortue FLNG is the flagbearer of the Mauretania-Senegal-Gambia-Guinea Bissau-Guinea Conakry (MSGBC) Basin, its floundering would cast an adverse shadow over many constructive developments in neighboring countries. A number of international majors, like ExxonMobil and Royal Dutch Shell, have joined the race to drill for oil and gas in the offshore waters of Mauretania, Senegal and potentially other countries. Guinea saw the inauguration of a Petroleum Ministry, together with its neighbors started to shape up its own petroleum code – a process which Senegal should be finalizing these upcoming weeks. Let’s see how one of the planet’s hottest wildcat drilling region manages to handle the temporary inconveniences.

By Viktor Katona for Oilprice.com

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