Equatorial Guinea looks to European gas buyers for Fortuna FLNG

Photo courtesy of Ophir Energy.

(Reuters) Equatorial Guinea is negotiating pricing terms with potential offtakers for production from its 2.2 MMtpy Fortuna FLNG project, eyeing Europe as its next key market.

While Asia remains a key LNG customer for Equatorial Guinea, the small west African country has "to compete with all the supply that is going to Asia", said Equatorial Guinea energy minister Obiang Lima, referring to new projects from Australia and the United States.

"We are seeing that the European market is becoming more attractive for the future than Asia," Lima said in an interview with Reuters on Wednesday on the sidelines of an industry conference in Singapore.

LNG producers such as Equatorial Guinea are benefiting from European buyers trying to wean themselves off Russian gas by taking advantage of short routes from Africa for the super-chilled fuel shipped in tankers.

The Equatorial Guinea government is targeting a break-even cost of around $6/MMBtu - $7MMBtu for gas from the Fortuna FLNG project supplied to Europe.

Current Asian spot LNG prices are around $5.50/MMBtu, while British NBP natural gas spot trading prices, a European benchmark, are at $4.20/MMBtu.

"We are coming to the final phases of designating our offtakers ... (but) one of the key criteria of this project that has not been decided yet is the fiscal terms that the government would provide to the project," Lima said.

The final investment decision on the project will be made by the end of this year, with completion set for 2019, he said.

"The biggest advantage that we have in floating rather than onshore (projects) is that a lot of the development is not done in-country," Lima said.

The project could be expedited as ship and rig builders like Singapore's Keppel Corp. can divert more resources to building its FLNG vessel as orders for new rigs and ships are cancelled amid depressed oil prices, he noted.

Lima remains bearish on oil and gas prices and sees the pricing rout that began for both in 2014 lasting through 2020, with the LNG supply glut and weaker demand from key Asian countries such as China continuing to weigh on sentiment.

Despite the bearish view, the energy minister is confident Equatorial Guinea will be able to award new acreage from its EGRonda 2016 Oil and Gas Licensing Round.

"The big majors are the ones acquiring assets because they understand that this is the best time to get positions and because they have the funds," Lima said.

"A lot of the majors have shown interest and I would not be surprised that if at the end the majors are the ones who get the majority of the acreage."

 

Reporting by Mark Tay; Editing by Tom Hogue

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