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Nigeria, others lead Africa’s boom in FLNG

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By Usman Oladimeji

Projects on both east and west coasts of Africa fuelled the growth.

According to Reuters’ interviews with analysts and energy corporations, Africa is leading the world’s trending new floating gas facilities as its governments attempt to keep up with the rapidly increasing demand in Europe, in a quick and swift manner. The growth is being fuelled by initiatives on both the east and west coasts of Africa by companies like Eni (ENI.MI), BP (BP.L), and smaller independent actors like Nigeria UTM Offshore. Mozambique shipped its first gas shipments abroad via Floating Liquefied Natural Gas (FLNG) vessels in November, while the Republic of the Congo is gearing up to send its first LNG exports in December. Currently, Africa exports 40 mmtpa (million metric tonnes per year) of natural gas.

Westwood Global Energy Group, meanwhile, forecasts that by 2027, the African continent would have added 10.2 mmpta in new FLNG capacity, involving projects in Mozambique, Nigeria, Senegal, Mauritania, and the Republic of the Congo. “We believe FLNG will be a nice tool for developing gas in a quicker and more efficient way,” Luca Vignati, Eni’s upstream director, told Reuters. Westwood predicts $13 billion will be spent on FLNG over the next five years, with Africa contributing for slightly under 60% of the additional capacity of 18.3 mmpta by 2027. It anticipates the commencement of a further 36.5 mmpta worth $22 billion after 2027.

Africa current FLNG capacity is greater than 50% of the global total.

FLNG facilities is a ship equipped to pump gas from offshore reserves, liquefy it, store it, and export it. They avoid the enormous and expensive infrastructure required to process gas onshore, and they maintain a safe distance from the communities that frequently protest the close presence of such projects. Since Shell’s (SHEL.L) groundbreaking but delayed FLNG vessel Prelude, stationed off Australia, experts say demand has increased rapidly due to advancements in vessel technology and turnaround time. Capex costs for Cameroon’s Golar FLNG project, a repurposed vessel, may be as low as $550 per tonne, an Analyst said, contrasting this with $900 to $1,100 per tonne for a new onshore terminal in the United States’ Gulf Coast.

Despite pricing fluctuations since the Russia-Ukraine war crisis, Africa has had a hard time pumping its gas due to the energy transition’s hit on fossil fuel funding. As a result of the energy shift, investors are wary of multibillion-dollar projects with high investment horizons of 20-30 years. With Eni aiming for new-build ships to produce after four years of investment, it shows that FLNG has a swift turnaround. Current FLNG capacity in Africa is greater than 50% of the global total. The offshore vessels have more allure since they avoid safety concerns like those that slowed down TotalEnergies’ $20 billion Afungi terminal in northern Mozambique.

Statistics shows a decline in upstream capital expenditure.

On the fringes of an African energy conference in Cape Town, Gavin Thompson, Vice Chairman of research at Wood Mackenzie, told Reuters that Africa is currently at its forefront and will continue to continue to expand. This is especially important in light of recent statistics from Wood Mackenzie showing a decline in upstream capital expenditures across Africa. By 2025, Eni anticipates a total output of 3 mmtpa from the Republic of the Congo, as it is deploying two vessels, one repurposed and another larger new vessel.

In addition, by June 2024, Eni and its JV partners expect to make a final investment decision on a second 3.4 mmtpa FLNG project in Mozambique’s Rovuma Basin. The Congo Republic’s hydrocarbons minister, Bruno Itoua, recently disclosed at the Cape Town Energy Conference, that the country’s first exports would come by December 2023. Itoua characterized it as both an investment opportunity and an exceptional chance to establish a legacy. The fact that over 600 million people—half of the continent’s population—do not have access to electricity raises controversy on African gas exports.

Domestic markets large-scale projects are hard to finance.

Yet, debt-stricken African governments are under pressure to cash in on royalties and taxes while prices are high. According to AFC’s Fagbule, it is fairly common for governments to set aside some gas from FLNG plants for domestic consumption; nevertheless, large-scale projects aimed at domestic markets are difficult to finance due to lack of customers willingness and ability to pay. He explained that the governments are aware of the growing demand for seaborne natural gas shipped across globally and are working to meet it as quickly as possible.

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