More investments are required for FLNG projects, in order to ensure project sanctioning and success, Westwood said in an report. Despite the FLNG liquefaction long presences, only three units are in the water and operational or under commissioning as of 2018.
Petronas and Shell built their own FLNG facilities, PFLNG-Satu and Prelude FLNG respectively. However, because of low commodity prices leading to increased pressure on maximising cost efficiencies, other players delayed financing decisions or cancelled FLNG projects. As a result, only one additional facility, Golar LNG’s converted Hilli Episeyo FLNG unit, is expected to begin operations with Perenco in Cameroon this year.
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Only ENI’s South Coral FLNG project managed to successfully secure project financing for c. $4.7bn from a consortium of 15 international banks and 5 export credit agencies (ECAs). However, the leverage achieved was $4.7bn out of a total cost of c. $8bn.
But there are a number of projects underway at various stages.
Westwood believes that the success of the current FLNG projects, should help lenders develop greater confidence in the FLNG sector. Whist financing choices will stem from various considerations, there is considerable liquidity in the credit markets chasing bankable opportunities. As technological risks are sufficiently mitigated, commercial risks become the focal point with external financing highly unlikely in speculative situations with no guaranteed offtake. Financing from Chinese / Asian entities will continue to be extremely competitive in situations where the operator / developer’s preference is potentially for higher leverage quantums with relatively less onerous financing terms.
If FLNG projects become more mainstream, its financing could potentially move towards smaller syndicates of project financing, similar to FPSO financing.
