East Africa - Major Gas Projects

Development Plans and Costs

Mike Wood - GCA

2014 Gaffney, Cline & Associates. All Rights Reserved.

2014 Gaffney, Cline & Associates. All rights reserved. Terms and conditions of use: by accepting this document, the recipient agrees that the document together with all information included therein is the confidential and proprietary property of Gaffney, Cline &
Associates valuable trade secrets and/or proprietary information of Gaffney, Cline & Associates (collectively "information"). Gaffney, Cline & Associates retains all rights under copyright laws and trade secret laws of the United States of America and other countries.
1 The recipient further agrees that the document may not be distributed, transmitted, copied or reproduced in whole or in part by any means, electronic, mechanical, or otherwise, without the express prior written consent of Gaffney, Cline & Associates, and may not be
used directly or indirectly in any way detrimental to Gaffney, Clines & Associates interest.
 Gas Discoveries - Mozambique and Tanzania
BIGWA-RUFIJI
BIGWA-RUFIJI

BLOCK
BLOCK 55 BLK-5A
BLK-5A BLK-5B
BLK-5B BLK-5C
BLK-5C

KISANGIRE
KISANGIRE MAFIA
MAFIA

BLOCK
BLOCK 44 BLK-4A
BLK-4A BLK-4B
BLK-4B BLK-4C
BLK-4C

PWEZA
SONGO
SONGO SONGO
SONGO

PAPA BLK-3A
BLK-3A BLK-3B
BLK-3B BLK-3C
BLK-3C

BLOCK
BLOCK 33
EAST
EAST PANDE
PANDE
MANDAWA
MANDAWA
MRONGE
BLOCK
BLOCK 22

BLK-2A
BLK-2A BLK-2C
BLK-2C
TANGAWIZI
LAVANI

BLOCK
BLOCK D
D
BLOCK
BLOCK 11
MZIA BLK-1B
BLK-1B BLK-1C
BLK-1C

MKIZI

LINDI
LINDI JODARI

MNAZI
MNAZI BAY
BAY N
N
ZIWANI
MNAZI
MNAZI BAY
BAY
NTORYA
NTORYA BLOCK
BLOCK 35
35
ESPADARTE

ORCA BLOCK
BLOCK E
E
MAMBA COMPLEX
2014 Gaffney, Cline & Associates. All Rights Reserved.

CORAL
ROVUMA
ROVUMA ON
ON
1139
1139 11 BLOCK
BLOCK 36
36
AREA
AREA 11
AGULHA

1139
1139 33
Moroni
Moroni






AREA
AREA 44

BLOCK
BLOCK FF
0 50.00 BLOCK
BLOCK 37
37
kilometres

2
Source: PetroView
 2014 Gaffney, Cline & Associates. All Rights Reserved.

3
Source: Anadarko
Mozambique
 Mozambique LNG Onshore Site Plan Palma Bay
2014 Gaffney, Cline & Associates. All Rights Reserved.

4
Source: Anadarko
 Tanzania
Plans for developments to be integrated
with major pipeline project
Domestic demand for power and
fertilisers
Government demands onshore LNG
plants
Several onshore sites under
consideration
Fields are typically 100 km from shore
Current plans for 4 x 5 MMtpa trains, fed
by several operators/discoveries
2014 Gaffney, Cline & Associates. All Rights Reserved.

5
Source: TPDC
 Tanzania - LNG Project Potential
Several discoveries
Similar development
considerations as
Mozambique
Statoil has stated
potential for FLNG up
to 3.5 MMtpa
2014 Gaffney, Cline & Associates. All Rights Reserved.

6
Source: Statoil
 Mozambique LNG Project Summary
Major integrated upstream/downstream project incorporating a multi-train
onshore liquefaction facility to monetize significant gas discoveries from,
initially, two offshore concessions in the Rovuma Basin, northeast
Mozambique
CAPEX: estimated by one sponsor a few years ago at up to US$16 Bn for
initial two-train (10 MMtpa) development
Natural gas production: initially 1,500 MMscfd for 2 trains from fields in
Offshore Areas 1 & 4; 1,500 m water depth; gas is dry so liquids expected
to be minimal
Plant location determined: Afungi LNG Park, Palma Bay, Cabo Delgado
Province, northern Mozambique; in vicinity of Offshore Areas 1 & 4
LNG Plant Capacity: initially 10.0 MMtpa via 2 trains; with a notional 50
MMtpa in total
Plans for 2 further Onshore trains
Anadarko and ENI reported to be considering FLNG for future trains, and
2014 Gaffney, Cline & Associates. All Rights Reserved.

to develop other smaller discoveries in the Blocks - expected to be in the

order of 2.5 MMtpa
View is that FLNG has lower CAPEX !! Reported to be 30% lower costs for
Australian Browse Basin projects

7
 Mozambique LNG - Project Development
Deepwater, close to shore
Dry gas initially, limited flow assurance concerns
Very prolific wells, - 100 MMscfd per well expected
Remote region, no infrastructure
All major hardware logistics likely to be by sea
Site for onshore plant selected appears to have
reasonable ground conditions
Camp up to 10,000 workers for construction of 2 trains,
airstrip, power plant required
Construction efficiency uncertain
2014 Gaffney, Cline & Associates. All Rights Reserved.

Extended jetties, dredging required

Late life water production may require future modification
to subsea system & pipeline
8
 Onshore LNG Development Costs
Much publicised benchmark rates now reported to be
approaching $2,000 per tpa, (as high as $3,000 per tpa for
Gorgon)
Apparent rapid growth in recent years
But no clarity in what is included in the cost:
Offshore development costs, platforms, pipelines to shore??
Gas pre-treatment - sweetening, LPG recovery??
Actual liquefaction costs, including storage and export jetties
costs are probably nearer to $1,500 per tpa
Still major uncertainties however, relating to location, site
2014 Gaffney, Cline & Associates. All Rights Reserved.

conditions, access, infrastructure, labour efficiency and costs

Wheatstone LNG site preparation costs (levelling and grading,
roads, dredging) reported to be $3 Bn !!
Labour/construction costs in Australia are dominant factor
9
 Cost Estimate 5 MMtpa Onshore Plant (750 MMscfd)
Project Component Equipment & Construction Eng. / Mgt. Total Cost Basis
Materials $ MM & Owners $ MM
$ MM $ MM
Standard, deepwater
Development Wells (15) 150 1,250 400 1,800 subsea wells.
Standard configuration,
Subsea Facilities 300 200 150 650 current technology.
Close to beach, limited
Pipeline to Shore 100 150 50 300 flow assurance risk.
Gas pre-treatment, Sweet, lean gas, low
condensate stabilisation, 250 250 150 650 condensate rates.
water handling
Standard configuration,
remote, poor
LNG Facilities 2,500 2,300 1200 6,000 infrastructure, but good
ground conditions.
2014 Gaffney, Cline & Associates. All Rights Reserved.

Dredging required for

Storage, Marine Facilities,
500 700 400 1,600 LNG tanker access /
Dredging
turning
Total $ MM per 5 MMtpa 3,800 4,850 2,350 11,000

10
GCA estimate
 Angola LNG Development Challenges

The 5.5 MMtpa, $10

billion Angola LNG plant
shipped its first cargo in
Mid 2013 after an 18-
month delay
2014 Gaffney, Cline & Associates. All Rights Reserved.

Required major land

reclamation/dredging
effort
Remote location
Dedicated tankers
included in costs??
11
Source: Bechtel
 Cost Uncertainties

Project Component Equipment & Construction Eng. / Mgt. Total Cost Cost Drivers
Materials $ MM & Owners $ MM
$ MM $ MM
Development Wells Well productivity, Water
150 1,250 400 1,800 depth. Rig Rates
Subsea Facilities Gas Composition.
300 200 150 650
Pipeline to Shore Distance to shore, flow
100 150 50 300 assurance
Gas separation, pre-treatment, Gas Composition
condensate stabilisation, water 250 250 150 650
handling
LNG Facilities, gas conditioning Site and soil conditions,
liquefaction, utilities, power labour rates, access,
2,500 2,300 1200 6,000 logistics, regulatory
compliance, local content
2014 Gaffney, Cline & Associates. All Rights Reserved.

LNG Storage, Marine Facilities, Water depth, soil conditions,

Dredging 500 700 400 1,600 storage capacity
Total $ MM per 5 MMtpa
3,800 4,850 2,350 11,000

12
 FLNG Costs
Reported to be in the order of $2,000 per tpa for the FLNG
vessel; including gas pre-treatment, but excluding subsea and
well costs
Reduced uncertainty fabricated in shipyard therefore
independent of site conditions
However as yet unproven
FLNG promoters claiming costs below $1,000 per tpa what is
included in this?
Prelude FLNG costs are reported to be in the order of $3,000
per tpa of LNG (3.6 MMtpa) but this also included costs for
production of Condensate and LPG (1.7 MMtpa), - nearer
$2,000 per tpa of liquids
Potential cost savings in offshore infrastructure if fields are
2014 Gaffney, Cline & Associates. All Rights Reserved.

located distant from shore eliminates pipeline costs

Peak production capacity?
Constraints on storage capacity?
Availability uncertain?
13
 2014 Gaffney, Cline & Associates. All Rights Reserved.

14
Source: Shell
Prelude FLNG
 Prelude

5.3 MMtpa of total liquids: including 3.6 MMtpa LNG, 1.3 MMtpa of condensate and
0.4 MMtpa of LPG
2014 Gaffney, Cline & Associates. All Rights Reserved.

Storage in the hull of the vessel

Reported CAPEX of $10 Bn to 12 Bn
Similar CAPEX indicated for 6 MMtpa dry gas case
Remains higher than equivalent onshore LNG plant
Bur valid for remote offshore fields
15
Perceived reduced cost risk??
Source: Shell
 2014 Gaffney, Cline & Associates. All Rights Reserved.

16
Source: FLEX LNG
Other Contenders - FLEX LNG
 Managing Uncertainty a Hybrid Approach ??
2014 Gaffney, Cline & Associates. All Rights Reserved.

Transport of Snohvit LNG Liquefaction /

Utilities Barge from Spain to Norway
17
Source: Iberdrola / Statoil
 Snohvit LNG Uncertainty Management
Capacity 4.4 MMtpa LNG
CAPEX reported to be $7.5 Bn (in
2006)
Extensive subsea investment
~150 km multphase tie back
Use of prefabricated LNG process
module/barge, floated into position on
the island
Similar concept used for Sakhalin 1
Central Production Facility, and
proposed for southern US liquefaction
plants
2014 Gaffney, Cline & Associates. All Rights Reserved.

18
Source: Statoil
 FLNG
Appears to offer a cost benefit in some locations, where it
can offset costs for major offshore facilities or pipelines
Similar cost levels to traditional onshore LNG
Can offset construction cost uncertainty in difficult/remote
locations
Potentially reusable
As yet unproven both in terms of development costs and
operability
The Snohvit hybrid development, with process equipment
2014 Gaffney, Cline & Associates. All Rights Reserved.

pre-fabricated on a barge, could be attractive for near-to-

shore fields, with a challenging onshore construction
environment

19