Equatorial Guinea LNG Project, Bioko Island, Punta Europa, Equatorial Guinea

The Equatorial Guinea LNG project is being constructed on the northwest side of Bioko Island at Punta Europa, near Equatorial Guinea's capital city of Malabo.

Natural gas for the project will be purchased from the Alba field participants, Marathon Oil, Noble Energy Inc and GEPetrol, and the LNG will be sold to BG Gas Marketing Ltd (BGML), a subsidiary of BG Group plc, under a 17-year purchase and sale agreement beginning in late 2007.

BGML will purchase the LNG on a Free-On-Board (FOB) basis at Bioko Island, Equatorial Guinea, with pricing linked principally to the Henry Hub index.

BGML intends to target the Lake Charles (Louisiana) import terminal as the primary destination for the LNG; however, the agreement provides destination flexibility for the LNG, enabling BGML to take advantage of prevailing market conditions at other import destinations around the world.

LNG PLANT COSTS

Total project cost is estimated at $1.4bn, of which approximately $1bn are engineering, procurement and construction costs, with the remainder comprised of owners' costs, contingency and working capital.

As of 30 June 2005 approximately 60%–65% of the total project costs have been incurred. Construction is proceeding on schedule with first deliveries of LNG expected in late 2007. Marathon Oil will control 60% of the project with Compania Nacional de Petroleos de Guinea Ecuatorial (GEPetrol), the National Oil Company of Equatorial Guinea, holding a 25% interest.

Other interested parties will include Mitsui & Co Ltd (Mitsui) (8.5%) and a subsidiary of Marubeni Corporation (Marubeni) (6.5%). These partners are the controlling interest in the Equatorial Guinea LNG Company Limited (EG LNG Co).

DESIGN OF THE BIOKO ISLAND PLANT

The LNG plant will use the Phillips optimised cascade process (developed by ConnocoPhilips). Key plant facilities will include: refrigeration systems, compressors, condensers, two LNG storage tanks and marine facilities that will allow for the berthing, mooring and loading of LNG ships ranging in size from 90,000m³ to 160,000m³ of both membrane and spherical design.

While the contracted off-take rate is 3.4 million metric tons per year and the off-take term is 17 years, the plant is expected to have the ability to operate at higher rates and for a longer period of time. Efforts are underway to acquire additional gas supplies through exploration and commercial means in order to expand the usefulness of this LNG facility.

Construction progress on the Equatorial Guinea LNG project continues according to plan with completion expected in the second quarter of 2007. The project has earned the distinction of being the fastest LNG project from initial concept to final investment decision.

The project is also expected to be one of the lowest cost LNG operations in the Atlantic basin with an all-in LNG operating, capital and feedstock cost of approximately $1 per million British thermal units (mmbtu) at the loading flange of the LNG plant.

Bechtel was awarded the contract for the design and construction. As of the end of the second quarter of 2006 the project was 87% complete on an engineering, procurement and construction basis.

TRAIN TWO

In August 2006 following the successful start of the first train of the LNG project a Front-End Engineering and Design (FEED) contract was awarded to Bechtel for the second LNG train. The FEED work is expected to be completed by the end of the first quarter 2007. The scope of the FEED work for the potential 4.4 million metric tonnes per annum (mmtpa)

The Train 2 LNG project includes feed gas metering, liquefaction, refrigeration, ethylene storage, boil-off gas compression, product transfer to storage and LNG product metering.

It is believed that Equatorial Guinea has the potential to serve as a regional gas hub, providing the means to commercialise the large volumes of stranded natural gas offshore in Equatorial Guinea and other significant gas resources in the Gulf of Guinea. This gas could be converted to LNG via a multi-train LNG complex and shipped to consuming markets in the Atlantic Basin.

The construction of Train 2 will rely on the securing of long-term gas supply agreements with the owners of surrounding gas resources. Discussions are underway with gas resource holders in Equatorial Guinea, Nigeria and Cameroon to secure the necessary gas supplies. When adequate gas supplies can be secured and on completion of the FEED a decision will be made during 2007 to proceed or not to proceed with Train 2.

NEW GAS

Exploration is still going at the Alba Field and the surrounding deepwater areas. In mid-2006 Noble Energy and Marathon announced a major natural gas and condensate discovery on the Deep Luba discovery well on the Alba Field.

The Bioko LNG plant could now be in for even larger production than previously planned. One of the Deep Luba well's three pay zones was tested at a stabilised rate of 18.1 million cubic feet of gas and 1,000 barrels of condensate per day.

BECHTEL CONSTRUCTION CHALLENGES

The Bechtel construction team on Bioko has faced a unique construction challenge. The work site is 60m above the ocean, so cryogenic pipes from the inland plant have to cross dense, sloped rain forest to get to the jetty where the LNG will be loaded onto tankers.

The team considered cutting through vegetation all the way down the slope and building a pipe-rack structure directly over it, but the moist, unstable soil and steep grade changes made construction dangerous. As an alternative they decided to build a 330m steel suspension bridge connected by one onshore and one marine tower.

The bridge is designed to carry 76cm diameter export and vapour return pipelines and utilities, and there will be a walkway from the top of the bridge down to the LNG loading platform.