5th May 2015 09:54
LONDON (Alliance News) - Ophir Energy PLC Tuesday said it has signed a binding heads of terms for a midstream chartering and operating services agreement with Golar LNG for a project in Block R in Equatorial Guinea, and said the initial capital expenditure needed has fallen by USD200 million.
The FTSE 250 oil and gas company said it signed the agreement with Golar LNG after holding discussions with GEPetrol, Ophir's partner on Block R. GEPetrol is expected to formally ratify the agreement next week, said the company in a statement.
The agreement outlines the "key commercial terms" for Golar to build, operate and maintain the floating liquefaction and storage vessel and related facilities on the Ophir-operated Fortuna floating liquefied natural gas project in Block R. The commercial terms were not revealed.
"Finalising our midstream partner is a significant step forward for the Fortuna FLNG project. This agreement accelerates the date of first gas and reduces costs in a critical part of the value chain," said Chief Executive Nick Cooper. "The agreement completes the value chain economics and allows Ophir to confidently plan for first gas, and 67,000 barrels of oil equivalent per day of production by mid-2019."
"We will now move immediately into the define phase of the upstream and midstream projects with a view to reaching final investment decision by mid-2016," he added.
The vessel to be used under the agreement is Golar's Gimi floating liquefied natural gas vessel. Golar will use the Gimi vessel under a 20-year charter term and during that period, Golar will be responsible for the sub-sea well control and receiving, liquefying and offloading the gas to liquefied natural gas vessels, said Ophir.
Ophir, as operator of the upstream component of the project, will lease the Gimi, and will be responsible for the construction of the sub-sea facilities, drilling the development wells, managing the performance of the reservoirs and together with the Ministry of Energy and Sonagas, market the gas on behalf of all the upstream parties, it said in a statement.
The Gimi is expected to have an annual average capacity of 2.2 million tonnes per year at a reservoir production rate of up to 400,000 million standard cubic feet per day, or 67,000 barrels of oil equivalent per day, with first gas expected mid-2019.
"Ophir and Golar have agreed a vessel charter rate that is competitive with US liquefaction tolls and that ensures that the Fortuna liquefied natural gas project is delivered at the low end of the cost curve for LNG projects," said Ophir.
The Fortuna project will now move into the full definition phase, and Ophir said Worley Parsons, which was appointed as the engineer for the project, will complete the front-end engineering and design for the project before the end of 2015, with the upstream front-end engineering and design due to be finished by the second quarter of 2016 before reaching the final investment decision phase in the middle of 2016.
In addition, Ophir said the flow rate established at the Fortuna drill stem test that was conducted in late 2014 has resulted in the estimated number of development wells needed to achieve first production to three from the previous estimate of seven. As a result, upstream capital expenditure to first gas is expected to be around USD800 million compared to the original estimate of USD1.0 billion.
Ophir said it expects to make further savings through the front end engineering and design.
"In keeping with its strategy of self-funding its development projects through selling down equity in the asset, Ophir will now turn its attention to bringing an upstream partner into the project, as well as reviewing options for incorporating the Fortuna LNG project into the group's debt structure," said the company.
"At a time when many other greenfield LNG projects are decelerating, Ophir has elected to accelerate the Fortuna FLNG Project to secure what we believe will be a better market opportunity at first gas, and to lock in anticipated reductions in upstream development costs," said Ophir.
Ophir shares were down 0.3% to 143.60 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
OPHR.L