Article by Lucien Joppen
___
The significance of the Coral South project for Mozambique was illustrated at the official launch in the summer of 2017. Several dignitaries, most notably the President of the Republic of Mozambique, Filipe Nyusi, the Minister of Mineral Resources Leticia Klemens, and Eni’s CEO Claudio Descalzi, the operator of the field, were present at the official kick-off of the project implementation phase.
During the ceremony all the drilling, construction and installation contracts for the production facilities were signed, as well as agreements with the Mozambican government for the regulatory framework and financing of the project. Coral South is the first project in the development of the considerable gas resources discovered by Eni in Area 4 of the Rovuma Basin. The field in itself is expected to hold 450 billion cubic metres of gas.
Challenging price environment
This particular field was discovered in May 2012 by the Italian company Eni and has materialized in a relatively short time span despite the challenging price environment in the past few years. Eni East Africa (EEA) will serve as chief operator holding a 70% operating interest, while Portugal’s Galp Energia, South Korea’s Kogas and Mozambique’s Empresa Nacional de Hidrocarbonetos (ENH) each hold a 10 % stake. Within EEA, Eni holds a 71.43 % interest and CNPC (China) 28.6 %. In 2017, Eni sold half of its shares in EEA to Exxon Mobil. Earlier, in 2016, the Area 4 partners signed a long running sale and purchase agreement with BP.
The gas will be extracted and processed via a FLNG-unit (Floating Liquefied Natural Gas) with a capacity of 3.4 million tons per year. The unit will be one of the first FLNG’s in Africa and only the third globally. Total project costs are estimated around 4.7 billion USD. The FLNG facilities construction will be financed through Project Finance covering around 60% of its entire cost. This is the first Project Finance ever arranged in the world for a liquefaction floater. The financing agreement has been subscribed by 15 major international banks and guaranteed by five Export Credit Agencies.
Lack of infrastructure
The choice for a FLNG has been driven by the lack of infrastructure on the mainland of Mozambique. Ultimately, onshore operations will materialize on the mainland, for example gas liquefaction plants which will be the domain of ExxonMobil. For the time being in this particular case, operating a FLNG is a more cost efficient method to extract and liquefy gas and store LNG. These technologically advanced vessels are moored above offshore natural gas fields. Subsea equipment, such as manifolds, subsea trees and flexible risers, are used to bring the gas to the surface from pockets under the seabed.
Equipment on the FLNG barge then purify the gas and cool it to minus 160 degrees celsius, converting it to liquid form. Next, workers load the LNG onto ships that can carry it around the world. FLNG facilities are a fairly new development. Unlike sprawling conventional onshore refineries and gas-processing facilities, they must perform the same operations in a quarter of the space, with strict weight limitations.
Light weight turbines
The contract for the engineering, procurement, construction, installation, commissioning and startup (EPCIC) of the Coral South FLNG facility and its associated risers and subsea flowlines system, as well as the installation of the umbilicals and subsea equipment, has been awarded to TechnipFMC, together with JGC Corporation and Samsung Heavy Industries, partners in the TJS Consortium with TechnipFMC as the leader.
Both Technip and JGC Corporation have awarded a contract to Baker Hughes to provide much of the equipment for the development, including subsea production systems to help extract the natural gas, and rotating machinery to power the purification and liquefaction process. Four GE gas turbines will generate electricity on board the FLNG facility, while centrifugal compressors will liquefy the natural gas. The turbines use components from jet engines designed to power airplanes like DC-10s and 747s. Their light weight makes them ideal for the FLNG platform. They’ll be built in Cincinnati, the home of GE Aviation, and the compressors will be built in Florence, Italy.
Striking gold
As already mentioned, the first LNG will be produced in 2022. Eni has expressed its ambition to become a global gas and LNG player. “As the world transitions to a low-carbon energy mix, Eni believes that the use of gas is critical to achieving a more sustainable future”, according to Eni CEO Claudio Descalzi. “The Coral South Project will deliver a reliable source of energy while contributing to Mozambique’s economic development. This partnership approach with our hosting countries is the foundation on which our joint sustainable growth strategy is built.”
Meanwhile, Paolo Marra of Baker Hughes says the country has ‘struck gold’ with this natural gas discovery. “It has the potential to put Mozambique on the map as a major LNG producer, together with countries like Qatar in the Middle East, the world’s largest exporter of liquefied natural gas.”
ExxonMobil: moving forward
The Coral Field is located in the Rovuma Basin and holds approximately 450 billion cubic metres of natural gas. These reserves have the potential to stimulate the economy of Mozambique and cement its position as one of the main exporters of LNG worldwide. Challenging price conditions have halted investments, according to press reports, for example the on shore production facilities. ExxonMobil, however, have announced it will ‘move forward very soon’. One of the main reasons is the rising demand for LNG from China and South-East Asia combined with few investments in LNG exploitation over the last three years due to low gas prices.
