Obiang gives first ‘hint’ of plan for Equatorial Guinea’s Fortuna block in Jan/Feb

The first “hint” of how the major Fortuna gas discovery offshore Equatorial Guinea will be developed is likely to come in January or February, the country’s oil minister Gabriel Obiang Lima said late Wednesday.

The government of Equatorial Guinea Tuesday awarded the license for the renamed Block EG-27 (formerly Block R) containing the Fortuna discovery to Russian oil major Lukoil, Malabo having taken back the license from the UK’s Ophir Energy at the start of 2019.

Speaking on the sidelines of a summit of the Gas Exporting Countries Forum (GECF) in Malabo, Obiang said the preferred option would be to pipe gas from EG-27 to the Marathon-operated EG LNG export plant at Punta Europa.

However, he said, a floating LNG option — the one favored by Ophir — was still on the table.

“We will work with Lukoil — probably by January or February we will be able to hint at the idea,” he said. “The initial idea is to bring that gas to Punta Europa. But the floating option is still an option.”

The resources of Block EG-27 are estimated at some 3.7 Tcf (105 Bcm) of gas, and the $2 billion Fortuna LNG facility had been expected to produce 2.2 million mt/year of LNG.

However, Ophir failed to secure financing to move ahead with the project.

Obiang said the block was re-licensed, with Lukoil emerging as the “best choice” to develop the gas resource.

“What we need to do now is to work with Lukoil on the type of development contract,” he said.

BACKFILLING EG LNG
By supplying EG-27 gas to the one-train, 3.4 million mt/year Punta Europa export facility, Equatorial Guinea will be able to help backfill the plant which has traditionally relied on the now declining Marathon-operated Alba gas field.

“We are working with Lukoil and Marathon on the possibility of bringing those resources to Punta Europa,” Obiang said, adding that it would be a similar project to one agreed earlier this year with US-based Noble Energy to pipe gas from the Alen field — currently under development — to the LNG plant.

“It could be the same scheme that we did with Noble, bringing more gas to Punta Europa for tolling to be able to process more LNG,” he said.

In addition, he said there was an additional resource in the north of the EG-27 block that could be explored, while ExxonMobil has made a nearby discovery offshore Nigeria.

“We also have some stranded gas assets, so whatever we do we need a scheme that has a pipeline to go to all of those areas,” he said.

First gas from the Alen field is expected to come to Punta Europa in the first quarter of 2021, he said.

Equatorial Guinea also has plans for Punta Europa — which shipped its first LNG cargo in 2007 — to form the basis of a regional gas export hub. It signed a deal with Vitol on Tuesday for the global trader to become a strategic partner in the project.

Obiang said any new gas discovery offshore Equatorial Guinea would need to be developed with the gas mega-hub in mind.

UPSTREAM INVESTMENT
Obiang said 2020 would be the “year of investment” for Equatorial Guinea, highlighting $1 billion in projects set to be launched, including a regasification plant for small-scale LNG, two oil refineries, strategic oil product storage facilities and a methanol-to-gasoline plant.

He also said he hoped for more upstream investment in the country, having awarded nine licenses to a number of offshore blocks on Tuesday.

“We want to have more development,” Obiang said.

He said he wanted existing operators — such as ExxonMobil and Marathon — to either invest more in their existing oil and gas fields or “move aside” and let other companies in.

Drilling has been gradually picking up in 2019 offshore Equatorial Guinea, which has been trying to encourage oil companies to carry out more exploration as it seeks to reverse a recent output decline.

Equatorial Guinea began producing oil in 1995 and saw its production peak at 425,000 b/d in 2004.

The country has been struggling to halt decline rates averaging 10%/year from its existing fields and production has been averaging around 120,000-130,000 b/d this year.

Obiang pointed to the Zafiro field, operated by ExxonMobil, as a brownfield development that could benefit from more investment.

“To extend the life you need to invest more. The decline in production has nothing to do with geology, it has to do with investment. You need to go to the next stage of recovery. And clearly that requires billions of dollars,” he said.

Output at Zafiro, which started production in 1996, has fallen to around 60,000 b/d from around 100,000 b/d in 2015, and further decline is likely.

 

Source: Platts

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