Liquefied Natural Gas (LNG)

South African LNG distributor DNG Energy has announced the arrival of South Africa’s first ever consignment of liquefied natural gas on Tuesday this week. The shipment arrived from Rotterdam and is a first for South Africa who has until now imported gas by pipeline from Mozambique. DNG Energy expects to commission a floating storage unit delivery in Q1 2022 in South Africa to support the country’s growing gas monetization agenda. The 8,000-ton LNG barge is currently being build in Durban by South African Shipyards. The company is notably working on providing gas to the road and maritime sector, especially for trucks, buses, and ships. In September this year, it partnered with Masana Petroleum Solutions to increase gas adoption within South Africa’s transport sector.

Earlier today, Eni held the naming and sail away ceremony of the Coral-Sul floating LNG (FLNG) vessel in South Korea. The event took place at the Samsung Heavy Industries shipyard in Geoje, in the presence of H.E. Filipe Jacinto Nyusi, President of the Republic of Mozambique, and H.E. Moon Jae-in, President of the Republic of Korea. The 3.4 million tonnes per annum (mtpa) FLNG forms part of the Coral South Projec and will be towed and moored at its operating site in the Rovuma basin offshore Mozambique next year. Once the FLNG facility will be in place, the installation campaign will begin, including mooring and hook-up operations at a water-depth of around 2,000 meters by means of 20 mooring lines that totally weight 9,000 tons. Production startup is then expected in the second half of 2022. Coral South Project achieved Final Investment Decision in 2017, only 36 months after the last appraisal well. FLNG fabrication and construction activities started in 2018 and were completed on cost and on time, despite the Covid-19 pandemic. The Coral Sul FLNG is 432 meters long and 66 meters wide, weighs around 220,000 tons and has the capacity to accommodate up to 350 people in its eight-story Living Quarter module. Area 4 is operated by Mozambique Rovuma Venture S.p.A. (MRV), an incorporated joint venture owned by Eni, ExxonMobil and CNPC, which holds a 70% interest in the Area 4 exploration and production concession contract. In addition to MRV, Galp, KOGAS and Empresa Nacional de Hidrocarbonetos E.P. each hold a 10% interest in Area 4. Eni is the offshore Delegated Operator and is leading the construction and operation of the floating liquefied natural gas facility on behalf of MRV.

South Africa’s state-owned Central Energy Fund (CEF) has issued a request for information (Rfi) for the development of an independently managed midstream LNG hub in Coega, within South Africa’s Eastern Cape Province. The project is developed under a joint-development agreement (JDA) signed between three South African state-owned entities: the CEF, Transnet SOC and the Coega Development Corporation. It was first announced during the 2019 Energy Budget vote speech and forms part of South Africa’s vision to integrate gas within its energy mix and support its transition away from coal. The RfI issued last Friday covers three distinct components: a gas aggregator that would consolidate gas demand through gas purchase agreements, an EPC contractor for the construction of fixed gas infrastructure from the Ngqura Port to the gas off-takers, and the provision of a floating, storage and regasification unit (FSRU). The CEF has requested all interested parties to submit their response by December 3rd and remains opened to receiving bundled replies integrating one or more components together. It is expected that the RfI would be followed by a procurement process. Where is the Gas Demand? Coega was selected as the initial hub to materialize South Africa’s gas ambitions because of the existence of off-take infrastructure and demand centers in its surroundings, including the Coega Special Economic Zone (SEZ). Potential off-takers notably include the 340 MW Dedisa PPP that currently operates at a 12% capacity factor but could be reviewed shall gas become available. It is also around Coega where Mulilo and TotalEnergies are developing a 200 MW mid-merit plant and where Karpowership is expected to deploy a 450 MW floating power plant to be fed with gas. An additional 1,000 MW power plant is confirmed there as part of South Africa’s Integrated Resources Plan (IRP), with procurement expected to start soon. Finally, existing and future industrial users are expected to represent a gas demand of 5 PJ per annum. Offshore bunkering operations at Coega required 1 million tonnes of heavy fuel oil pre-COVID and could switch to natural gas.

Renergen’s shares have been up +43.14% on the Australian Securities Exchange (ASX) and +31.27% on the Johannesburg Stock Exchange (JSE) since Friday. The most significant jump happened today with an increase of almost +30% on the ASX and +15% on the JSE after the company reported a 600% increase in its 1P helium reserves in South Africa. Source: Yahoo Finance Renergen is South Africa’s only onshore petroleum production right holder and sits over a Production Right area of 187,000 ha in the Free State around the towns of Welkom, Virginia and Theunissen. This is where its subsidiary Tetra4 is developing methane and helium reserves to produce liquefied natural gas (LNG) and helium, mostly for the domestic market at first. A 600% Jump in 1P Helium Reserves Following the recent successful drilling campaign and as part of Renergen’s ongoing assessment and development of Virginia, the company had commissioned international Reserves and Resources accreditation agency Sproule to estimate its reserves and resources of methane and helium within the Virginia Production Right area as at September 1, 2021. Sproule’s estimation resulted earlier today in an upgrade of both methane and helium reserves. 1P helium reserves have notably increased by an impressive 620% to 7.2Bcf while 1P methane reserves have increased by 427% to 215.1Bcf. As a result, 2P total gas, including methane plus helium, is now equivalent to 65 MMscfd for the remainder of the license tenor. Phase 1 is Almost Complete The development of Phase 1 at Virginia is already well underway and involves the connection of 12 existing gas wells to a new 52km gas pipeline and small-scale LNG and helium processing plant. Renergen secured all the necessary funding for this first phase and held a groundbreaking ceremony at the end of 2019. Drilling is now ongoing, along with pipeline construction and the development of the gas plant, with a commissioning expected before the end of 2021 and start of helium production in Q1 2022. Meanwhile, logistics and transport companies are expected to make a major part of future customers, and Renergen launched South Africa’s first LNG auction in July 2020 to allocate future LNG production. Strong interest for the auction confirmed the appetite of the South African market for cleaner and cheaper fuels. In August 2021, Renergen also executed its first LNG supply agreement not linked to the transport sector: the 5-year contract was inked with Consol Gloss for about 14 tons per day of LNG and will start in January 2022. It carries a price which will be linked to the floating LPG price in South Africa. Towards Phase 2 Phase 2 is expected to follow by 2024, further increasing LNG production to meet an anticipated increase in demand and provide LNG supplies across all major highways in South Africa. Key contracts for phase 2 were awarded in early 2021, including the FEED studies, and the final investment decision (FID) is expected to be taken once these are completed. Phase 2 is designed to allow Renergen to produce significantly larger quantities of LNG and liquid helium with a target of 44 MMscfd of gross gas sales made up of helium and methane. Phase 2 is expected to require a CAPEX of $800m and involve a drilling campaign of 297 wells, anticipated to build up to 44 MMscfd at full production. 65% of Phase 2’s anticipated production is already pre-sold to clients including Linde, Meser, Helium 24 and iSi. Details on the Virginia Gas Project are available in the “Projects” section within your Hawilti+ research terminal.

Gabon is thought to hold anywhere between 3 to 5 trillion cubic feet (Tcf) of gas, although the country remains a small gas producer. To date, most of its gas has remained on the ground or flared – with only small quantities monetised domestically for power generation in Libreville and Port Gentil. But as Gabon implements an ambitious “Green Gabon” environmental policy and seeks to diversify its economy, the country wants to cut routine flaring altogether and monetise it for the benefits of its industries, households, and economy. The recent Gabon Oil, Gas & Energy Summit organized by IN-VR in Libreville last October notably exposed the alignment of most parties on the need to monetise gas instead of flaring it. A New Gas Strategy in the Making To achieve its gas ambitions, Gabon is currently working on a new Gas Master Plan with Wood Mackenzie and the World Bank’s Global Gas Flaring Reduction Partnership (GGFR). The plan will have four major ambitions: reduce gas flaring, increase energy security, expand access to affordable energy and attract investments into gas projects. Gabon’s flared gas currently emits about 2,244,500 tonnes of CO2 per year, enough to generate 500 MW of power. Natural gas also features prominently within the country’s 2021-2023 Plan to Accelerate Transformation (PAT), which includes a dedicated Gas Task Force headed by former Gabon Oil executive Yann Pierre A. Livulibutt Yangari. “Our gas strategy is targeting actions across the whole value-chain. In upstream, we want to get operators to explore for gas and stop considering it as a risk. In midstream, we want to see flared gas being monetised for the benefits of the Gabonese economy. Finally in downstream, we want to improve gas supplies especially of liquefied petroleum gas (LPG), compressed natural gas (CNG) and liquefied natural gas (LNG),” Yangari said during IN-VR’s summit. As it stands, Gabon intends to primarily monetise flared gas to generate power, manufacture urea and produce methanol. These are the major industries identified based on existing gas reserves and technology available from existing investors and operators in the country. Once these are developed, hopes are that by-products would follow, especially when it comes to LPG, CNG (Autogas) and micro-LNG. Source: DGEPF “We are working on supporting the development of a gas-based economic network to support local content development, promote technology adoption and support industrialisation,” Yangari added.   While Gabon has not discovered enough gas reserves to justify the development of more significant industries like LNG for export or gas-to-liquids, the country remains hopeful. Its 12th Licensing Bid Round has resulted in the award of new exploration blocks, and upcoming drilling campaigns could result in new gas discoveries supporting further gas developments in the medium-term. To justify the investment, Gabon is putting forward its growing industrial base driving demand for both power and gas. Last September, the Gabon Power Company (GPC) notably signed a landmark Concession Agreement with Wärtsilä for the development, supply, construction, operation, and maintenance of a new 120 MW gas-to-power project in Owendo, next to the capital city of Libreville. But beyond just the power sector, Gabon wants to provide gas to its mining, forestry, agro-industry, and steel industries. In parallel, its logistics network is expanding with railways and maritime industries both positioned to be potential off-takers sooner than later. An Opportunity for Small-Scale Gas Projects Gabon’s vision relies on the monetization of gas into CNG for transport and micro-LNG for industries. A key strategy is to expand the country’s CNG network but use micro-LNG for any remote industries located over 400km from producing fields, especially mining industries. To support such expansion, the country is seeking investors across several projects such as LPG plants, LNG and CNG plants, LNG and CNG storage, onsite regasification and bi-fuel conversion. Chief amongst them is the need to secure 30,000 cubic metres of additional butane storage capacity, up from only 4 to 5,000 cubic metres now. Source: DGEPF Port Gentil features prominently within that vision as a pilot city to grow the CNG industry. It is there that Perenco already runs a private gas retail station for 40 of its own vehicles. Now, Gabon wants to grow the market by constructing public CNG stations in partnership with oil marketers and develop a new pricing structure for CNG. The aim is clear: reduce petroleum products imports while generating additional revenues from domestic gas. Perenco Takes the Lead Perenco will be a key actor of that transition to gas. The operator is the country’s sole commercial gas producer and currently supplies gas feedstock to the power stations of Port Gentil and Libreville. In fact, 100% of Port Gentil’s power relies on Perenco’s gas while 70% of Libreville’s power is generated from the operator’s gas supply. “We have invested $500m into the development of a 400km onshore and offshore gas gathering system in Gabon that supplies gas to power plants but also key industries such as Sobraga. In the process, we created 150 jobs,” Director General Adrien Broche said during the IN-VR Summit. Perenco is now increasing its investments and leveraging on its existing infrastructure to commission a 10 to 15,000 tonnes per annum (tpa) LPG plant in Batanga by 2023. Batanga is currently the cornerstone of its gas business and is equipped with enough compressors to compress gas to over 100 bars so it can be transported across the country. “The Libreville and Port Gentil power stations currently represent an off-take of about 40 MMscfd,” Broche explained. “While only half of that capacity was coming from flared gas, we are installing additional compression capacity so all feedstock supplied to power plants comes from previously flared gas. We have installed two onshore compressors this year and are now expecting additional ones for offshore operations. By mid-2022 or early 2023, all gas we send onshore for power generation will come from previously burned resources,” he added. The Need for an Industry and Policy Consensus But to furter monetise gas and create jobs, Gabon must first find a way to aggregate

Tanzanian Energy Minister January Makamba has declared that negotiations would officially start on November 8 to get the Tanzania LNG project off the ground. This notably follows a meeting today in Dar es Salaam with Paul McCafferty, Equinor’s Vice President Exploration & Production International – Africa. On October 4th, Tanzanian President Samia Suhulu Hassan and Minister Makamba had also held a similar meeting, virtually, with Shell’s CEO Ben van Beurden. The development of the $30bn Tanzania LNG project in Lindi, in southern Tanzania, has been on the table for several years but talks had been suspended since the end of 2019. Last January, Equinor had even decided to write down the value of the project by $982 million, saying that its current economics did not justify keeping it on the balance sheet. But things changed when President John Magufuli died in March and his Vice President Samia Hassan took over the country’s top job. She made a direct mention of the project during her inauguration speech, giving clear signals of her intention to revive it. Since then, the Government of Tanzania has had several talks and discussions with Equinor and Shell in order to address pending issues and pave the way for the project’s development. Tanzania LNG would monetise almost 50 trillion cubic feet of gas (Tcf) discovered in offshore blocks 1, 2 and 4. Block 2 is operated by Equinor (65%) along with its partner ExxonMobil (35%) while the national oil company TPDC has the right to participate with a 10% interest. The partners have drilled a total of 15 exploration wells since 2011, resulting in nine discoveries with an estimated volume of over 20 Tcf. On the other side, Blocks 1 and 4 are operated by Shell (60%) along with Singaporean partner Pavilion Energy (20%) and Indonesian partner Medco Energi (20%). The base case development plan envisages a two-train onshore facility with a combined capacity of 10 million tonnes per annum (mtpa). On the Tanzanian side, hopes are that construction could start by mid-2023 for a commissioning by June 2028.

On Monday, natural gas and helium producer Renergen announced the completion of a helium forward sale agreement for 100,000 units over a period of 19 years. Each unit represents a thousand standard cubic feet (mcf) of helium at 99.999% purity and in liquid form and weights 4.7kg (37.5 litres when in liquid form). The units will be sold to Argonon Helium US Inc, a newly incorporated American helium trading company in Delaware. Argonon’s vision is to use these helium units to establish a spot market for helium. “Unlike other more transparent commodities, helium is not presently traded in the spot market and a visible price per mcf is not available. The collaboration between Renergen and Argonon is specifically designed to bring transparency of pricing into the helium market and highlight the growing global importance of helium,” Renergen said in a statement. The helium will be coming from Renergen’s Virginia Gas Project onshore South Africa. This is where Renergen’s subsidiary Tetra4 is developing the country’s first and only onshore petroleum production right to become the first liquefied natural gas (LNG) and helium producer in the country. The company already began producing small quantities of compressed natural gas (CNG) in 2016, which it supplies to the transport and logistics industry. The Virginia Gas Project is the next major phase of development, targeting the production of LNG and helium by the end 2021 by developing total proved (1P) methane reserves of 40.76 billion cubic feet (Bcf) and 1P helium reserves of 1.01 Bcf. Its Phase 1 consists in significant infrastructure expansion with a new scalable gas plant and pipeline, and a maximum production target of 74.6 million cubic feet per day (MMcfd) (about 350kg) of liquid helium and 2,700 GJ (50 tons) of LNG. Upon start of production, Renergen will become South Africa’s first distributor of LNG at filling stations through its partnership with French major TotalEnergies, and the country’s only domestic producer of helium. But the recent deal with Argonon further paves the way for the second phase of development at Virginia. With proved and probable (2P) reserves of methane estimated at 138.99Bcf and of helium estimated at 3.41 Bcf, the project has significant growth potential. As a result, Phase 2 is expected to follow by Q4 2023, further increasing LNG production to meet an anticipated increase in demand and provide LNG supplies across all major highways in South Africa. Key contracts for phase 2 were awarded in early 2021, including the FEED studies, and the final investment decision (FID) is expected to be taken once these are completed. Phase 2 is designed to allow Renergen to produce significantly larger quantities of LNG and liquid helium. Future helium’s production will be further supported by gas strikes in March 2021 at the POO7 and MDR1 wells: the former returned a helium concentration of 4.38% while the latter returned a helium concentration of 3.15%. Renergen’s recent deal with Argonon gives it potential pre-funded helium sales from Phase 2 of up to $25m and a portion of these funds would be used to accelerate Phase 2 of drilling without the need for an equity issue. Full details on the Virginia Gas Project are available in the “Projects” section within your Hawilti+ research terminal.

Fugro has been awarded a monitoring contract by Saipem that will see it deploying its InclinoCam® vision technology for the Greater Tortue-Ahmeyim gas project offshore Senegal and Mauritania. The project involves the development of 15 trillion cubic feet (Tcf) of gas discovered on the maritime border between Senegal and Mauritania via a 2.45 million tonnes per annum (mtpa) floating LNG (FLNG) unit in Phase 1 where first gas is expected in Q3 2023. Fugro will start executing its contract with Saipem from December this year and will install more than 190 piles over 6 months from a jack-up barge. “Fugro’s rapid precise positioning will provide actionable Geo-data on the monopile inclination to accelerate the project schedule and a touchless solution that is much safer than conventional monitoring,” the company said in a statement today. Full details on the Greater Tortue Ahmeyim (GTA) LNG project are available in the “Projects” section within your Hawilti+ research terminal.

TotalEnergies has delayed the commissioning and first gas at its $20bn Mozambique LNG project from 2024 to 2026 following the declaration of Force Majeure earlier this year. The 12.88 million tonnes per annum (mtpa) onshore terminal reached FID in 2019 and was under-construction when the Islamist insurgency in Cabo Delgado in the north of Mozambique forced TotalEnergies to shut down activity. This leaves the southern African country with only one LNG terminal to be commissioned in the first half of this decade, Eni’s Coral South FLNG. The project relies on a floating LNG (FLNG) vessel and is unaffected by instability and insurgency around the city of Palma. The 3.4 mtpa FLNG unit is expected to start producing gas in 2022 with a final investment decision (FID) on phase 2 expected before 2030. Meanwhile, there is still no visibility on the future of the 15.2 mtpa Rovuma LNG onshore terminal where FID was expected to be taken by ExxonMobil and Eni in 2020 but was also delayed following changing market dynamics and the Covid-19 pandemic. Mozambique entered the current decade with firm ambitions to become a major LNG exporter by 2025. The country was expected to reach a double-digit growth of 11.1% in 2024 and 2025 following the commissioning of Mozambique LNG. Such revisions will now have to be revised downward. Details on the Coral South FLNG, Mozambique LNG and Rovuma LNG projects are available in the “Projects” section within your Hawilti+ research terminal.

Partners on the 2.4 million tonnes per annum (mtpa) Hilli Episeyo floating LNG export terminal offshore Cameroon have agreed to expand capacity utilization by 200,000 tonnes in 2022 and possibly by another 400,000 tonnes from 2023. The project involves national oil company SNH, independent upstream operator Perenco and global LNG infrastructure operator Golar LNG. The Hilli Episeyo is sub-Saharan Africa’s first floating LNG unit. Since its commissioning in 2018, it has operated at half capacity (1.2 mtpa), which will be increased to 1.4 mtpa next year. The capacity increase will be accompanied by the drilling and appraisal of two to three incremental gas wells by the end of 2021 and an upgrade of upstream facilities next year. At the end of 2020, Perenco had already completed works on the Sanaga 2 gas compression platform, which fall within phase 2 of the FLNG project and is already supporting gas production levels at the Hilli Episeyo. Additional capacity utilization could still be further achieved in the near future. “Under the Agreement, Perenco and SNH are granted an option (“Option”) to increase capacity utilisation of Hilli by up to 400,000 tons of LNG per year from January 2023 through to the end of the current contract term in 2026. This has the potential to increase total annual LNG production from Hilli to 1.6 million tons from January 2023 onwards,” Golar LNG said in a statement yesterday. The Hilli Episeyo FLNG project develops Cameroon’s gas both for exports and for the domestic market. While all produced LNG is sold to Gazprom Marketing & Trading, the unit also produces up to 5,000 bpd of condensates and up to 30,000 tonnes of LPG for local consumption. As a result, Cameroon’s LPG imports were reduced by half following completion of all associated gas infrastructure three years ago. The project required substantial infrastructure development, including at the existing onshore Bipaga gas treatment plant which had until then been used to process and supply gas to the 214 MW Kribi gas-to-power plant. On top of 56km of pipeline infrastructure, new facilities were built to provide for the smooth operations of both projects, and the production of condensates and LPG. Full details on the Hilli Episeyo FLNG are available in the “Projects” section within your Hawilti+ research terminal.