Angolan LNG export advances

Angolan LNG export advances

     The monetization of Angolan gas reserves 

Angola, a West African coastal country already well known for its substantial oil exports, is now on the brink of entering the Global LNG (Liquefied Natural Gas) export market. Its newly constructed liquefaction plant is expected to come on-stream later this year, giving the state a new opportunity to monetize its extensive, and previously stranded, gas reserves.

The new plant

Angola LNG, a Sonangol/Chevron-led joint venture, is soon to complete the construction of a $9 billion gas liquefaction plant, which represents the largest single investment ever made in Angola. The new plant has been built in the Congo River delta and will have the capacity to produce 5.2 million tonnes of liquids (mostly LNG – equivalent of 6.8 billion cubic metres (bcm) of natural gas per year – as well as LPGs and other liquids). It will also have 360,000 cubic metres (cm) of LNG storage, LPG and condensate storage, and a loading jetty capable of receiving vessels up to 210,000 cm capacity. The LNG project will be capable of producing 1 billion cubic feet of clean gas per day for the domestic and international markets.

Natural gas supplies

The plant will use gas from a series of offshore blocks to supply the liquefaction plant with over 10 trillion cubic feet (over 300 bcm) from gas reserves, equating to around 20 years’ worth of LNG exports at full capacity. (See map below) The main source of supply for the LNG plant will be Associated Gas (AG) - this is gas produced as a by-product of oil wells.

Map showing Angolan offshore blocks and LNG site at Soyo

The Angola LNG Project will use as feedstock deep-water AG from producing Block 15 (ExxonMobil), Block 17 (Total), Block 18 (BP), and Blocks 0 and 14 (Chevron). The project will also develop previously discovered non-associated gas (NAG) fields in Blocks 1 and 2 to supplement AG production. The gas produced in these blocks will be transported via three high pressure pipelines to the onshore LNG plant, where the gas will then undergo conditioning and extraction of Natural Gas Liquids before liquefaction to LNG. However, as oil fields mature and associated gas production deteriorates, further non-associated gas from previously discovered gas fields are expected to supply the plant. The majority of Angola’s deep and ultra-deep water areas are considered to be highly attractive and are yet to be fully explored.

Financial Benefits

The monetization of Angola’s natural gas reserves is a logical progression, given the clear benefits the project will reap for the state. The development of an LNG facility provides a commercially attractive export route for the large volumes of natural gas which Angola currently wastes through flaring (burning off gas from oilfields, when it cannot be used on site). Not only is this a waste of the earth’s resources it is also a significant contributor to greenhouse gas emissions. So the double benefits of reducing this waste and pollution also lead to great commercial advantage in income from the LNG sold. The Government will hope that the export of LNG can supplement economic growth in the country, whilst also enabling continued offshore oil development.  

Potential Markets

Originally it was anticipated that the LNG project would market large volumes of its production to the US market, which it is geographically and commercially well positioned to target.  Sonangol and ENI both maintain a shareholding in the Pascagoula, Mississippi Gulf regasification terminal in the USA. But with the US market becoming self-sufficient in natural gas, and now paying considerably less for its imports, Angola LNG will have to realign its strategy and target other more commercially viable markets. As with any LNG project the high prices of the Asian markets will be of interest, and China is also demonstrating a keen interest in Angola, with several high value investments there. Already one of the largest importers of Angolan oil, it may well become an importer of LNG as well. Angola is also close to the developing South American LNG markets. 

Elsewhere, Angola LNG may wish to target more locally based countries in Europe - a market more accessible in terms of distance for LNG ships to travel, though perhaps not as attractive in terms of pricing.  Angola LNG’s recent opening of a London based office, focusing on marketing and sales, demonstrates its desire to target European based markets. In the meantime, one can assume that Angola LNG will look to optimize sales in the short term by redirecting as much LNG to the spot market as possible when the price is right.