Equatorial Guinea LNG project stumbles as Schlumberger quits

LONDON (Reuters) - A pioneering liquefied natural gas project in Equatorial Guinea, bogged down by delayed financing, ran into further trouble after U.S. oil services company Schlumberger pulled out of the venture, two other operators said on Thursday.

FILE PHOTO: A general view of the world's first Liquefied Natural Gas (LNG) pipe rack suspension bridge in Punta Europa, Equatorial Guinea, February 5, 2014. REUTERS/Pascal Fletcher/File Photo

Ophir Energy, the London-based company heading the Fortuna development, and Golar LNG, which operates floating LNG facilities, said Schlumberger had decided to withdraw due to problems with the project’s financing.

Schlumberger was not immediately available for comment.

The Fortuna development would be west Africa’s first deepwater LNG project and includes a floating terminal that liquefies gas offshore, not onshore as usual.

Reuters reported earlier this month the growing frustration of Equatorial Guinea’s government at the delays and its ultimatum to take the project off Ophir or scrap it altogether.

Golar LNG participated in Fortuna as part of the OneLNG joint venture it had established with Schlumberger. On Thursday it said Schlumberger withdrew from OneLNG due to the financing problems and its own priorities for spending its resources.

Golar Chief Executive Iain Ross said funds would take time to find and may come from new equity partners that would replace Schlumberger.

“I don’t believe it’s dead at all,” Ross said of the project.

“We’d like to keep the project going and we’re also in discussion with other potential partners to replace Schlumberger on the project ... We believe in the project,” he told investors on a conference call.

Ophir, which confirmed Schlumberger’s departure from Fortuna, also hinted at finding new equity partners.

“Ophir has already held informal discussions with other, well-capitalised, potential partners for our Fortuna project. Following (Golar’s) announcement ... we have now formalised discussions and are actively moving forward with them,” it said.


Fortuna is a so-called FLNG project, a pioneering design that shrinks complex infrastructure typically spread over hundreds of acres onto a single vessel. Golar operates an FLNG in Cameroon which became the world’s first converted FLNG project and boosted hopes for the Fortuna development.

Like FSRUs, vessels which regasify LNG offshore, FLNGs are expected to inject flexibility and liquidity into the global LNG market because once they become accepted technologies they will reduce the time and costs of developing and exporting gas.

But Ophir, an independent oil and gas company with little experience in complex LNG projects and a small balance sheet, has had problems concluding the $1.2 billion in financing and was told by the government it may lose the project.

Overlooked by Western banks due to Fortuna’s design, Ophir wooed Asian lenders instead but were left scrambling after talks with Chinese players collapsed last year.

“While it is ‘in talks’ with others including Temasek, the loss of the CEO and the threat by Equatorial Guinea to give others its production licences if it doesn’t close financing this year all seems to add up to problems for that project,” Trevor Sikorski, analyst at consultancy Energy Aspects, said. “It does seem as if that project now is hanging by a thread.”

Ophir replaced its chief executive, Nicholas Cooper, this month in a bid to get its strategy back on track. Its shares were down almost 10 percent at 56.9 pounds each at 1345 GMT while Golar’s shares fell 18 percent to $28.35.

Additional reporting by Shadia Nasralla; Editing by Edmund Blair and Adrian Croft