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Tuesday, 5 May 2015

Ophir Energy plc appoints Golar as Midstream Partner for Fortuna FLNG Project in Equatorial Guinea

Golar LNG ("Golar") announced today that it has signed a binding Heads of Terms with Ophir Energy Plc ("Ophir") for the provision of the GoFLNG vessel Gimi. The Heads of Terms has been approved by Ophir's Equatorial Guinea, Block-R upstream partner GEPetrol, and will be formally ratified by GEPetrol next week. 
The agreement will be structured as a 20-year tolling contract, commencing commercial operations in the first half of 2019. Block R's 2.5 tcf of high purity 2P gas resources, situated in an area of benign sea states, are ideally suited for the application of Golar's GoFLNG technology. 

GoFLNG offers a technically and commercially robust approach to developing Block R reserves, with a competitive tariff directly comparable to the USA Gulf of Mexico brown field LNG projects currently under construction. Ophir and GEPetrol's selection of Golar to provide the Gimi, is further evidence of the technical and commercial competitiveness of GoFLNG, and the attractions of a short lead-time and lower risk implementation.

Golar with its partners Keppel Shipyard and Black and Veatch committed to the Gimi FLNG conversion in December 2014. Gimi will benefit from utilising the same configuration of utilities and liquefaction facilities as its sister ship Hilli, with variations to accommodate production direct from the deep-water reservoir.

At full production the vessel will have a contracted capacity of 2.2 mtpa of LNG, to be marketed by Ophir and GEPetrol. The project is expected to deliver an EBITDA for Golar in the first full year of operation in the region of $350M. The additional earnings associated with the vessel variations to accommodate deep water production have not been included in this estimate as the contracting strategy for this additional scope has not been finalised. Gimi will be Golar's second GoFLNG vessel following Hilli, which is scheduled to commence commercial operations in Cameroon during the first half of 2017.

The integrated Ophir/GEPetrol/Golar project is expected to take FID during the first half of 2016 following completion of the upstream FEED study.  The short lead-time between signing of the Heads of Terms, and the scheduled commencement of commercial operations once again demonstrates the unprecedented pace possible for GoFLNG projects.

Golar's CEO Gary Smith commented "Golar is delighted to have secured a contract for our second GoFLNG vessel. This commitment with Ophir and GEPetrol to employ a GoFLNG vessel in Equatorial Guinea represents a further step in the implementation of Golar's strategy to become the industry's leading integrated midstream LNG services provider, supporting resource owners, gas producers and gas consumers. Our new approach to developing LNG projects is stimulating significant interest today.

Accordingly, Golar has now, based on its framework agreement with Keppel Shipyard, commenced negotiations for the company's third GoFLNG vessel".


Nick Cooper, Ophir's CEO commented "Finalising our midstream partner is a significant step forward for the Fortuna FLNG project. This agreement accelerates first gas date and reduces costs along the value chain. The project has been refined to allow the option to deliver LNG at attractive returns into both Pacific Basin and Atlantic Basin LNG customers. The agreement completes the value chain economics and allows Ophir to confidently plan for first gas, and c. 67,000 boepd of production in 1H 2019.

At a time when many other greenfield LNG projects are decelerating, Ophir has elected to accelerate the Fortuna FLNG Project to secure what it believes will be a better market opportunity at first gas and to lock in anticipated reduced upstream development costs.  We will now move immediately into the upstream and midstream FEED with a view to reaching FID by mid-2016.

We are pleased to have secured Golar as a partner; the firm is a leading provider of FLNG solutions and the flexible and competitive commercial terms we have agreed will ensure that the final investment decision can be taken at current LNG prices. Ophir sees many parallels with the oil-equivalent emergence of leased-FPSO's ca. 25 years ago. This development of re-fitting vessels and leasing them to independent E&P companies both unlocked a series of oil fields and also provided competitive advantage to those early adopters of the technology. Ophir believes that the same is now about to happen for FLNG."


6 comments:

  1. Golar LNG ("Golar") announced today that it has commenced discussions with partners Keppel and Black & Veatch aimed at exercising an option, under an existing framework agreement, for the ordering of a third GoFLNG unit similar to the Hilli and the Gimi.

    The specific objective of these discussions will be to mature the option to deliver a third unit for start-up in 2018 i.e. between the target on-stream dates of 2017 and 2019 for the first two units destined respectively for Cameroon and Equatorial Guinea.

    This initiative flows from significant interest being stimulated today by Golar's new approach to developing FLNG projects. The company continues to evolve its opportunity funnel and has identified a number of possible leads for deploying facilities similar to Hilli and Gimi, for the commercialisation of high quality, stranded gas accumulations in relatively benign met-ocean conditions. Work continues to mature these leads, although these remain subject to business development uncertainty.

    Golar intends to pursue the third GoFLNG vessel on a similar contractual basis as the second vessel, preserving flexibility on design and delivery schedule, and including cancellation provisions. At present the Company does not envisage this third GoFLNG option requiring the issuance of new equity.

    The Chairman of Golar, Sir Frank Chapman, commented: "Progress with our projects in Cameroon and Equatorial Guinea provides evidence of the technical and commercial competitiveness of GoFLNG, and customer recognition of the benefits of the shorter lead-time and lower risk implementation inherent to our approach. We intend to maintain first-mover momentum by positioning the company to capture new business opportunities, while safeguarding Golar's capacity to fund and execute existing and any new projects".

    ReplyDelete
  2. U.S. crude oil rose above $60 a barrel on Tuesday for the first time since Dec. 11 2014, after protesters shut down the eastern Libyan oil port of Zueitina, hampering exports.

    U.S. crude oil was up $1.17 to $60.10 a barrel by 8:09 a.m. EDT (1209 GMT), near an almost five-month high. Brent crude oil was up 98 cents at $67.43 a barrel, having broken Monday's 2015 high of $67.10.

    Zueitina was one of the few Libyan ports still exporting oil as many others have closed due to fighting or disruptions at oilfields since the ousting of former dictator Muammar Gaddafi.

    Libyan oil output is now less than 500,000 barrels per day, officials say, a third of what Libya pumped before 2010.

    A strong dollar earlier weighed on oil, making the commodity more expensive for holders of other currencies.

    ReplyDelete
  3. With the 3rd GoFLNG, new order book is at least $1.4B for 2015

    ReplyDelete
  4. LONDON: While oil futures prices rebound with vigor as analysts cite strong demand, the physical crude market tells a much more cautionary tale.

    Tens of millions of barrels are struggling to find buyers in Europe with traders of West African, Azeri and North Sea crude blaming poor demand.

    The deep disconnect between the oil futures and physical markets looks similar to the events of June 2014 when the physical market weakness became a precursor for a futures price crash.

    "Being large physical buyers of crude we have a direct pulse of the market and feel immediately when it is well supplied, as is happening now," Dario Scaffardi, executive vice resident and general manager of independent Italian refiner Saras, told Reuters.

    "In the short-term, futures prices do not necessarily reflect accurately the physical market."

    Benchmark Brent oil futures prices more than halved between June 2014 and January 2015 after OPEC refused to cut output and instead chose to undercut more expensive producers, including a booming U.S. shale oil sector.

    But since January's lows of US$46 per barrel, prices have risen back to US$69 per barrel on Wednesday on fears the output in the United States would fall deeper than expected and on signs of a faster-than-expected demand rise across the world.

    ReplyDelete
    Replies
    1. LONDON: While oil futures prices rebound with vigor as analysts cite strong demand, the physical crude market tells a much more cautionary tale.

      Tens of millions of barrels are struggling to find buyers in Europe with traders of West African, Azeri and North Sea crude blaming poor demand.

      The deep disconnect between the oil futures and physical markets looks similar to the events of June 2014 when the physical market weakness became a precursor for a futures price crash.

      "Being large physical buyers of crude we have a direct pulse of the market and feel immediately when it is well supplied, as is happening now," Dario Scaffardi, executive vice resident and general manager of independent Italian refiner Saras, told Reuters.

      "In the short-term, futures prices do not necessarily reflect accurately the physical market."

      Benchmark Brent oil futures prices more than halved between June 2014 and January 2015 after OPEC refused to cut output and instead chose to undercut more expensive producers, including a booming U.S. shale oil sector.

      But since January's lows of US$46 per barrel, prices have risen back to US$69 per barrel on Wednesday on fears the output in the United States would fall deeper than expected and on signs of a faster-than-expected demand rise across the world.

      However, data from OPEC and the International Energy Agency show the world is still pumping 1.5 million barrels per day more crude than it consumes. Traders say they are seeing increased evidence of crude barrels struggling to find a home.

      Traders in Azeri Light crude, usually one of Europe's favorite grades due to its high quality, said some 10 cargoes from the May tanker loading program are struggling to find buyers, just two days before June volumes are due to go into the market.

      As a result, the Azeri price premium to benchmark dated Brent is the weakest since December, when it hit a five year low.

      In the North Sea, Norwegian Ekofisk crude fell to its weakest since August last year due to a significant number of unsold May cargoes, despite June program already trading.

      The worst situation, however, is in Angolan and Nigerian crude, which has struggled in the past two years due to the U.S. oil boom.

      Traders said around 80 million barrels of Nigerian and Angolan crude oil are on the market with at least a dozen May-loading cargoes still available.

      Indian refiners, which had bought large quantities of Nigerian oil in March and April, are now turning to cheaper Iraqi Basra and Venezuelan crudes.

      "Near term oil market fundamentals continue to look dire, particularly in the Atlantic Basin, with Nigerian, Mediterranean and North Sea differentials all weak," analysts from London-based Energy Aspect consultancy said on Wednesday.

      PUSHING THE MYTHIC ROCK UPHILL

      There is no guarantee oil futures will definitely follow the physical market as they did after June 2014.

      A number of unknowns could take oil prices either way. A failure to reach a nuclear deal between Iran and the West in June will reduce the likelihood of increased supplies from the Islamic Republic and therefore give prices some support.

      The ex-boss of BP, Tony Hayward, said last month the withdrawal of capital and workforce from the U.S. shale oil industry was so steep that a new oil price bull market may come much quicker than expected.

      Others argue that shale producers have become much more efficient in recent months and can switch production back on as soon as prices reach US$70 per barrel.

      The head of oil trading house Vitol, the world's largest, Ian Taylor, said he saw another dip in oil prices soon.

      On the demand side, the biggest unknown is whether China will resume buying large volumes of oil for its strategic reserve in the second half of the year.

      However, an increasing number of market watchers agree that the fundamentals point to what should be a more bearish market, at least until either supply is cut or demand increases.

      Delete
    2. "We cannot help but compare the current price strength to the myth of Sisyphus," said Tamas Varga from PVM oil brokerage.

      "The top of the current bull mountain might not be close but unless there is a fundamental change in the physical supply/demand balance, the rock might start rolling back down shortly again just like it did in the second half of 2008 and 2014 only for the bulls to start the arduous uphill battle all over again".

      Delete

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