Schlumberger ditches Fortuna FLNG plan

03 May 2016, Week 17, Issue 637

Schlumberger has dropped out of a plan to participate in the construction of a floating LNG (FLNG) plant offshore Equatorial Guinea. Ophir Energy announced the service company’s withdrawal on April 29, saying that plans were moving ahead regardless and that costs were falling. 

However, a final investment decision (FID) on Fortuna has now been pushed back to the fourth quarter of the year, with first gas targeted for early 2020. In January, Ophir said it would reach FID by mid-year, with first gas in 2019. 

Schlumberger signed on to the Fortuna FLNG scheme in January this year, under a non-binding heads of terms. Ophir said the companies had been unable to complete the transaction on the terms agreed and, as a result, talks had ended. 

Ophir said that the project remained “technically and financially attractive” and that there were a number of alternatives to Schlumberger. The company went on to say talks were continuing with other parties, on various topics including equity participation, vendor financing and pre-sales of gas. Offtakers have been narrowed down to three options, it said. 

Following completion of the front-end engineering and design (FEED), bids were submitted, with costs reduced from US$600 million to US$450-500 million gross. The development and production plan was submitted to Equatorial Guinea’s Ministry of Mines, Industry and Energy (MMIE) in March. 

“The reduction in the capex to first gas has lowered the project breakeven oil price to approximately US$40 per barrel,” said Ophir’s CEO, Nick Cooper. “We continue to work closely with Golar, the prospective offtakers and the other potential partners and remain confident that we will take the FID in 2016.”

Schlumberger had been due to acquire a 40% economic stake in the FLNG project, with a commitment to reimbursing 50% of Ophir’s past costs. This would have covered Ophir’s share of spending to first LNG sales, it said at the time. 

The service company had also signed a memorandum of understanding (MoU) with Golar LNG, focusing on developing gas reserves and FLNG. The deal, signed at the same time as the Ophir heads of terms, was to provide access to “a wide range of uneconomic gas reserves by delivering low-cost LNG production solutions”, Golar said, describing it as ground-breaking. 

The two companies working together will be able to provide an integrated package, which will reduce risk and secure financing for gas projects. Its main aim will be to accelerate the time it takes to bring gas reserves into production.

Edited by

Ed Reed

Editor

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