By Oleg Vukmanovic
LONDON (Reuters) - Golar LNG (O:GLNG) said it had started commercial operations at a pioneering floating liquefied natural gas (FLNG) production platform in Cameroon, $70 million under budget.
It is the first FLNG vessel of its kind and is likely to boost demand for Golar's technology in Africa and beyond.
The Hilli Episeyo FLNG vessel, converted from an ageing tanker for $1.2 billion, produced the first LNG on March 12 but only exported its first cargo in May, to China, after technical issues delayed a ramp up in production.
After continuously producing LNG over 16 days at an average of 7,500 cubic metres/day, Golar's project clients have contractually accepted the facility, marking its commercial start, Golar said in a statement.
Golar is in talks to develop similar projects in Senegal-Mauritania with BP (L:BP) and with Ophir Energy (L:OPHR) in Equatorial Guinea.
The successful start-up removes uncertainty about the risks associated with squeezing a liquefaction plant typically spanning hundreds of acres on land into a single, 1970s-built ship with four liquefaction units bolted onto its sides.
Trading companies and oil majors are keen on the technology for its relatively low cost and ability to unlock stranded reserves beyond the reach of pipelines.
Developer Golar provides the liquefaction facility and services under a production tolling agreement with oil firm Perenco and Cameroon's state-run Societe Nationale Des Hydrocarbures (SNH).
All of the plant's 1.2 million tonne annual output was sold, via a competitive tender, by Perenco to Gazprom Marketing & Trading (MM:GAZP) for eight years.
In a statement, Golar LNG said commercial tolling fees will add about $164 million to its earnings before interest, tax, depreciation and amortization annually, plus an estimated $45 million in operating cash flow based on current oil prices.
All told, the Hilly Episeyo came in $70 million under budget, Golar said, a rarity in the LNG industry where project costs routinely balloon billions of dollars over budget.