UTM Offshore inks contract for Nigeria’s first floating LNG project

UTM Offshore has signed an agreement with United Kingdom’s Kellogg Brown and Root, Japan Gas Corporation and Technip Energies for the front-end engineering design (FEED) for Nigeria’s first floating liquefied natural gas (LNG) project.

The deal, signed in London on Wednesday, was financed by Africa-Exim Bank and is geared to boost export earnings while helping to alleviate demand shortages at home.

UTM Offshore is undertaking the development, design and construction of an FLNG facility with an LNG nameplate production capacity of 1.2 million metric ton per annum and a storage capacity of 200,000 cubic meters, as well as ancillary facilities to be located 60 km from the shore of Akwa Ibom State, Nigeria.

Julius Rone, chairman/CEO of UTM Offshore Limited, said the 1.52 million tonnes per annum (MTPA) FLNG facility, with a capacity to process 176 million standard cubic feet of natural gas per day and condensate, will help monetise stranded gas offshore.

“We opted for FLNG because FLNG was originally developed to help realise the promise of natural gas – specifically, to bring gas to the global market from small offshore fields and nearshore terminals in areas lacking infrastructure – especially pipelines.

Timipre Sylva, minister of state for petroleum resources, said the project vindicates the government’s policy towards increasing natural gas production and consumption as encapsulated in its ‘Decade of Gas’ initiative.

And as the world shifts to cleaner energy sources, Sylva said Nigeria is in a vantage position with over 209 trillion cubic feet (Tcf) of proven gas and a potential upside of 600 Tcf of gas, the most extensive in Africa, and in the top 10 globally.

“However, due to a multitude of factors including a lack of investment, transportation and export infrastructure, and technological challenges, the majority of our gas deposits have yet to be produced.

“Hence the need to unlock our huge natural resources and drive investments with floating LNG technology even with the latter serving as a game changer for Nigeria in sync with the Decade of Gas initiatives of the Federal Government of Nigeria,” he said.

Floating LNG offers the benefit of flexibility, is cheaper and removes constraints involving constructing and securing pipelines to transport gas.

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The traditional LNG model is pursuing “Economies-of-Scale” with major projects of over 10 MTPA requiring many long-term offtake contracts to underpin the financing.

“The world markets as we all know it today needs low-cost, flexible LNG supply and has limited capacity to underpin major conventional projects. The solution, UTM offshore believes, is a standardised floating LNG that allows the costs to be 20-40 percent cheaper with FID thresholds of just 1.5-2.5 MTPA. And this is where UTM offshore FLNG project will hold sway, have the desired impact as well as influence,” said Rone.

Rone said UTM offshore sees the FLNG option as a game changer because it offers significant advantages over traditional onshore liquefaction plants ranging from delivering projects cheaper and faster as it offers reduced capital costs, particularly as its technical partners shipyards have gained experience with construction and standardised solutions are employed.

The project developers hope to commence construction as soon as possible and if that happens, this will be the third FLNG plant in Africa and the first designed by a company on the continent.

Existing FLNG plants in operation are the Golar FLNG HILLI (Cameroon), CORAL FLNG (Mozambique) owned by Eni and its partners and TANGO FLNG (Congo) owned by Eni and its partners.

According to Sylva, market research analysis shows the FLNG market is estimated to increase at a compound annual growth rate of 27.14 percent, reaching $88.99 billion by 2024.

“The UTM offshore FLNG project is therefore timely and will lead towards a faster-moving, more diverse and more flexible global LNG industry,” he said.

Experts say the latest signing of FEED contracts marks a major milestone in the first FNLG project developed by an African-owned company on the continent.

“UTM Offshore CEO, Julius Rone has been a true champion of gas in Nigeria and Africa. His resilience, patience and outside-the-box thinking with a savviness to bring so many world-class companies and service providers to this project is extraordinary. We commend Afreximbank’s President Oramah for making this project a reality,” said NJ Ayuk, executive chairman of the Africa Energy Chamber.

He said UTM Offshore’s signing of the deal will be a game changer within Africa’s gas market.