Our Europe editor
Ophir Energy of the UK said it had signed six preliminary agreements for the sale of cargoes from its Fortuna Floating LNG project offshore Equatorial Guinea in West Africa.
The London-based exploration and production company had earlier shortlisted a group of counterparties for the sales. It described the companies as established LNG buyers in European and Asian markets, though declined to say who they were.
Offtake
Ophir and the unnamed parties have now signed six Heads of Agreements for the offtake from Fortuna FLNG project, with several of them giving the UK company a share of profits from cargoes diverted and sold into higher-priced markets.
Another element contained in some of the accords is pre-payment by the buyers for some of the cargoes during the early years of the project. Ophir is selling 2.2 million tonnes per annum of LNG, though the total demand requested under the HoAs has seen the offtake sold several times over. "The HoAs are based on a variety of different pricing constructs with formulae that consist of either European gas market netbacks, oil indexation or a combination of both and that in some cases includes the provision of a floor price,” Ophir said.
“Offtake under several of the HoAs also incorporates a sharing of incremental diversion income earned above the base contract formula for LNG volumes that are subsequently sold into higher value markets,” the UK company explained.
In addition, the UK company said it now estimated that the gross capital expenditure required to be spent before first gas was produced had been revised downwards from $800 million to $600M, based on recent input from the ongoing upstream front-end engineering and design work.
The midstream Fortuna FLNG partner is Norwegian LNG carrier owner and specialist floating project company, Golar LNG.
Golar has already signed an agreement to provide the former LNG carrier "Gimi" as a liquefaction hull to be placed over the Fortuna gas field offshore.
The Norwegian firm with its partners Keppel Shipyard of Singapore and Kansas-based US liquefaction process equipment company Black & Veatch decided on the "Gimi" FLNG conversion in December 2014.
Ophir recently announced an increase in forecast feed-gas reserves. Gross contingent resources on Block R are estimated at 2.6 trillion cubic feet to 3.0 Tcf.
Ophir Chief Executive Nick Cooper said the Fortuna FLNG project continued to move forward on schedule with the now formal signing of all the HoAs for offtake with a core group of LNG buyers.
“Each offtaker’s proposal offers something different, thereby providing Ophir with a range of pricing formulae and differing commodity risk profiles which will be helpful when we narrow down the short list in the first quarter of 2016,” Cooper explained.
“We are also pleased to report that the estimated cost to first gas has been reduced by a further 25 percent during FEED,” he said.
As well as pricing structure, Ophir has secured additional elements to its LNG offtake HoAs that are “significant for the development” of the project.
These include the offer to pre-pay for LNG volumes "in substantial quantities" over the early years of production by the Fortuna FLNG hull.
The company said the funds received from pre-payments could cover 30 percent to 50 percent of Ophir’s total net cost to first gas and could therefore be a major contributor towards funding of the project.
Pre-payment
“This cost reduction, plus the offered LNG pre-payment mechanisms materially reduce the amount required to fund Ophir’s portion of the project ahead of the Final Investment Decision in mid-2016,” the CEO added.
“The Upstream FEED process is presently about 50 percent complete and as a result management is able to refine and reduce the remaining upstream cost to first gas.
“The project has been able to capitalise on the deflationary cost environment and has been redesigned to increase standardisation of components wherever possible,” Ophir said.
