LONDON/CAPE TOWN, Aug 4 (Reuters) - Gunvor has offered to help Equatorial Guinea with financing as the Swiss commodity trader looks to edge out rivals bidding for supply from Africa’s first deepwater floating liquefied natural gas (FLNG) plant.
Gunvor, Vitol and Royal Dutch Shell have been shortlisted for an LNG off-take deal from the $2 billion Fortuna project with a decision expected this month.
Industry sources say Gunvor is looking to help state-run Sonagas finance a 30 percent stake in the project in return for selecting it to export gas from it.
“It is now between Vitol and Gunvor, and Gunvor is the front-runner,” said one anonymous source aware of the talks, which are still under way.
“Gunvor is going to finance the Sonagas 30 percent equity. Sonagas is very happy with Gunvor as they will also work on building a joint venture to do government-to-government LNG trading,” the source said.
Another industry source confirmed both aspects of Gunvor’s proposal. Gunvor declined to comment.
Pre-financing deals where players with funding lend it to companies or countries for projects in exchange for supply later on are common in oil but still rare in LNG.
A successful deal would make Gunvor one of the first trade houses to secure a mid- to long-term LNG supply deal, showing the aggressive steps traders are taking to gain a foothold in production.
Gunvor itself would not own a stake in Fortuna under its proposed deal. Instead, Sonagas would take a stake and could potentially also take profits on LNG exports via a joint venture with Gunvor, sources said.
First though, Fortuna’s current owners would have to dilute their stakes to make way for Sonagas’ entry.
The OneLNG consortium comprising shipping firm Golar LNG and oil services provider Schlumberger owns a 66.2 percent stake in the project. Ophir Energy owns the remainder.
Ophir Energy declined to comment, citing ongoing evaluations of the three LNG off-take proposals.
CASH IS KING
With ample supply holding spot LNG prices LNG-AS at multi-year lows, Fortuna's owners are refraining from selling its entire output, betting prices will rise by the time they start production in 2020, industry sources said.
The size of Gunvor’s proposed supply deal is unclear. But sources say Fortuna will likely sell only as much LNG as it needs to secure bank financing - roughly half the plant’s output - in order to keep the rest to trade.
Chinese funders, including China State Shipbuilding Corp, are providing $1.2 billion in loans to Fortuna.
Gunvor has landed several major deals this year in key LNG growth markets.
In January it outbid rivals to win a tender to supply about 60 LNG cargoes to Pakistan over a five-year period. In March it agreed a swap deal with Gail India, giving it access to cheap U.S. supply.
At a news conference in June, Equatorial Guinea Oil Minister Gabriel Obiang Lima said the main criteria for deciding on the Fortuna off-take deal would depend on who offered the highest price and best terms.
“Whoever provides the biggest cash and good terms and alternatives to the state,” he said.
Fortuna will be Africa’s first deepwater floating liquefaction facility with production capacity of 2.2 million tonnes per year and start-up expected in 2020. (Editing by Veronica Brown and Jason Neely)
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