Development using the Coral Sul FLNG, the floating liquefied natural gas unit

Coral South was the first project approved by Eni’s Area 4 partners for developing gas resources discovered in the Rovuma Basin, off Mozambique’s coast. The project involves producing and selling gas from the southern part of the Coral field, using a floating plant for Liquefying Natural Gas (LNG) with a capacity of 3.4 million tonnes, linked to 6 subsea gas producing wells.

Coral Sul was developed with an approach based on energy optimization, based on a systematic analysis of efficiency. Its characteristics include zero flaring during normal operations, the use of thermal efficient aero-derivative gas turbines for refrigerant compressors and generation, the use of Dry Low NOx technology to reduce NOx emission, and waste heat recovery systems for the process.

In June 2022, hydrocarbons were first introduced into the plant. With the introduction, the Coral Sul FLNG produced its first cargo of liquefied natural gas in the second half of 2022, thus adding Mozambique to the list of LNG-producing countries, and contributing to the country’s economic and social development.

A milestone for development in Mozambique

The development activities of Area 4 offshore (where Eni’s has a 25% stake) in 2020 concerned the Coral South gas project, operated by Eni, and the gas discoveries of Mamba Complex where Eni is expected to coordinate the upstream development and production phase, and ExxonMobil the construction and operation phase of natural gas liquefaction facilities onshore.

The project has reached a progress of more than 80%, will generate significant revenues for the country, and will create more than 800 new jobs during the operational period. Eni’s significant progress in reducing the time-to-market of reserves is underpinned by its Coral South flagship project, approved in 2017 just 36 months after the finalization of the exploratory campaign, and now close to completion with the launch of the FLNG (Floating Liquefied Natural Gas) unit, the first floating LNG plant, whose construction started in 2018.

The Coral Sul FLNG

A real gem of technology, the Coral Sul FLNG floating gas liquefaction and exporting unit is the first of its kind on the African continent and third in the world. 432 metres long and 66 metres wide, the Coral Sul FLNG weighs a total of approximately 220,000 tons, with an eight-storey living module that can accommodate up to 350 people. It is anchored at a depth of around 2,000 metres, with the help of 20 mooring lines weighing a total of 9,000 tons.

The Coral Sul FLNG offshore Mozambique will extract 450 billion cubic metres of gas from the field, and Baker Hughes has secured an 8 year service contract for maintenance and monitoring of turbomachinery equipment. In addition, Baker Hughes will provide remote monitoring and diagnostics drawing on its iCenter capabilities, including Carbon Optimizer and other digital services based on Bently Nevada’s System 1 technology (health and maintenance monitoring, data services and cyber-asset management).

Other LNG projects in Mozambique

As of February 2022, and according to TotalEnergies’ CEO, Patrick Pouyanne, the company wants to restart its USD $20 billion Mozambique LNG project in 2022-2023 after it has been put on hold due to an insurgent attack. In addition, the company is expanding in Mozambique with the acquisition of BP’s retail network, wholesale fuel business, and logistics assets. With this acquisition, the company strengthens its position in the country. TotalEnergies has been present in Mozambique since 1991.

Mozambique LNG is the country’s first onshore LNG development, and currently the largest private investment in Africa. Once completed, it will have a production capacity of 12.8 million tonnes of LNG per annum, using feed gas from Mozambique Area 1. The initial plan was for the project to produce the first LNG cargo in 2024.

As stated by Pouyanne, “this agreement reflects TotalEnergies’ willingness to pursue its investments in Mozambique’s energy sector in order to deploy its multi-energy strategy in the country through retailing of petroleum products for mobility, the major Mozambique LNG project and accompanying supply of domestic gas, and opportunities under review in the area of renewable energies”.

TotalEnergies EP Mozambique Area 1 Limitada, a wholly-owned subsidiary of TotalEnergies, operates Mozambique LNG with a 26.5% stake. Mozambique LNG has already secured long-term deals with companies like Shell, EDF, CNOOC, Tokyo, JERA, and CPC.

Mozambique’s Sovereign Wealth Fund

The draft law on the Sovereign Wealth Fund of Mozambique (FSM), to be sent to parliament, provides that capitalisation will start with 2022 revenues from the Coral Sul platform, which began extracting gas from the Rovuma in June.

The draft law is expected to be considered by parliament by December 2022, according to the memorandum between the government and International Monetary Fund (IMF) that supports the financial assistance programme of USD $470 million until 2025. The draft law establishes that the FSM will be capitalised in the first 15 years with 40% of revenues from gas and oil, with 60% coming from the state budget.

From year 16 onwards, revenues will be shared equally between the fund and the state budget, the document states, which is different from the proposal presented in 2020 by the Bank of Mozambique and which was subject to public consultation – the proposal was to split it equally for 20 years and then allocate 80 percent of the revenues to the fund.

The law provides that this base will be the gross revenue from the exploitation of oil resources (including the tax on oil production and corporate income tax), but the amounts to be handed over to the state relating to the “production bonus” and “production sharing” are still to be regulated. Each year, the government will make forecasts for the revenue of the sector in the following year and the priority will be to fill the quota foreseen for the state budget – the law indicates that the FSM portion may serve to cover the difference, if the reality falls short of the forecasts.

On the other hand, if the funds exceed the forecasts, the excess goes to the FSM. The law requires the definition of a National Development Strategy to guide the structural investments that should be made with the transfers of gas and oil revenues to the state budget. On the capitalisation side of the FSM, the rule is to “invest in non-oil sector assets”; the proposed law on the FSM states that its objectives are to use revenues from oil and gas to “leverage the country’s development, contribute to the stabilisation of the state budget against the volatility of oil revenues, and accumulate savings for future generations”.

The FSM will be based on a dedicated bank account, in dollars, at the Bank of Mozambique.

About the Author: Felipe Gaitán Michelsen