Woodmac: Coral has avoided the reefs and is set to sail

Eni’s last week’s sanctioning of the giant offshore gas field development offshore Mozambique is good news for the country’s government, Alasdair Reid, Wood Mackenzie’s Research Manager Southern and East Africa, said.

The Coral field, discovered in May 2012, is located within Area 4 and contains approximately 450 billion cubic meters (16 TCF) of gas in place.

Reid said: “Coral has avoided the reefs and is set to sail. Coral, the first ultra-deepwater FLNG project ever to be sanctioned, has beaten the larger onshore LNG projects in Mozambique to FID.

“Using a vessel liquefy gas offshore will allow the partners to realise cash flow from Mozambique earlier. The project will generate annual gross revenues of over US$1.5 billion per year (before tax) for 25 years, utilising 4.7 trillion cubic feet of gas over its lifetime. With FID out of the way, the project is now on track for first LNG production in 2022.”

He added: “This is really good news for the government of Mozambique. It demonstrates that, despite ongoing credit issues, there is still enough belief in the investment climate for partners to raise finance and move projects forward. There is huge long-term potential for offshore gas in East Africa. The region will see a big hike in investment over the next decade as gas becomes an increasingly important part of the global energy mix.”

Matthew Day, Wood Mackenzie’s Global LNG analyst, said: “It’s a slow year for the wider LNG supply business but a big year for FLNG.

“LNG project sanctions over the last two years have been few and far between. This reflects the prevailing oversupply in the LNG market. However, the only two projects we expected to be sanctioned this year, Coral and Fortuna, are both Floating LNG. This highlights a positive shift in industry perception toward the FLNG concept.

“Majors Eni, Shell, Exxon and recently BP have all now endorsed the floating LNG concept. With stranded gas resources suited to FLNG elsewhere in Africa, Mozambique offers Eni an ideal regime to test this new approach.“

Day added: “Smaller-volume projects are moving forward in this oversupplied environment. With an output of 3.5 mmtpa, all contracted to BP, Coral has had an easier time of finding a market compared to other mega-projects chasing sanction.

“With global activity levels and costs low, now is a good time to add new capacity, even if the LNG market does presently look over supplied. By the time Coral produces first LNG in 5-7 years time, new LNG supply is likely to be required in the global market.”