Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

4-Traders Homepage  >  Equities  >  London Stock Exchange  >  BP    BP.   GB0007980591

BP (BP.)

News SummaryMost relevantAll newsSector newsTweets 
The feature you requested does not exist. However, we suggest the following feature:

China pumps cash into African floating LNG projects in strategic push

share with twitter share with LinkedIn share with facebook
share via e-mail
06/27/2017 | 03:04am CEST

China plans to pour almost $7 billion into floating liquefied natural gas (FLNG) projects in Africa, betting on a largely untested technology in the hope that energy markets will recover by the time they start production in the early 2020s.

Western banks are wary due to the depressed state of the shipping and gas markets, as well as the technical difficulties of pumping gas extracted from below the ocean floor, chilling it into liquid form on a floating platform and transferring it into tankers for export.

China, however, is making a strategic push into FLNG, aiming to become the lowest cost seller of the complex floating plants and lead the global rollout of a technique that remains in its infancy, with only one project in commercial production so far.

The country needs gas as a cleaner alternative to coal under a drive to improve air quality in its cities, and has already lent $12 billion to Russia's conventional Yamal LNG project in the Arctic as U.S. sanctions scared away Western banks.

It has also lent or committed almost $4 billion to three FLNG schemes off the African coast. In two more African projects costing a total of $3 billion (2.36 billion pounds), it plans not only to provide the funding, but also build the production platforms.

"We see a real commitment to FLNG in China both from the construction side and from the LNG consumption side where decreasing costs mean potentially lower cost LNG," said Steve Lowden, chairman of Jersey-based NewAge which is planning FLNG projects off Congo Republic and Cameroon.

China already dominates the global market for solar panels and is a major supplier of coal-fired power plants, aided by easy money, cheaper labour and state support.

Now, with Beijing pushing President Xi Jinping's "Belt and Road" vision of expanding trade links between Asia, Africa and Europe, it is turning to FLNG to bring high technology work to its shipyards and create jobs - a strategic priority.

FLNG is also attractive to resource-rich but debt-burdened African countries. Projects can sail into place, drop anchor, and begin exporting for much less than the cost of onshore plants, the price of which quadrupled in the decade to 2013.

That, at least, is the theory. The reality is that the technology remains complex. Royal Dutch Shell's <RDSa.L> mammoth Prelude FLNG plant, for example will be aboard the world's biggest floating structure, but must squeeze the equipment into a quarter of the space occupied by an LNG plant on dry land.

Wave motion and ocean currents add to the difficulties.

The $12.6 billion Prelude project, which is due to start operating off Australia in 2018, is typical of those conceived during the era of high energy prices. However, spot LNG prices have fallen 70 percent since early 2014 and are expected to remain under pressure or drop further due to extra supply from new conventional plants in Australia and the United States.

Despite this, some producers and buyers are banking on the glut ending early in the next decade, although they don't want to lock themselves into big projects, preferring smaller, more flexible ones like in Africa.

The only operational FLNG project launched in Malaysia last year, with construction of the floating platform costing around $1.6-$1.7 billion. Bankers say this is still too expensive and if the Chinese can build one for $1 billion, they would corner the market.


With new investments in costly conventional LNG plants on hold, the only two production projects to advance this year are floating types, in Mozambique and Equatorial Guinea. Both are largely backed by Chinese loans although the platforms are being built by more established Asian shipyards.

Lowden said the two NewAge projects will be wholly financed by Chinese companies and this time also built in Chinese shipyards. "They are more than fully able to handle such projects," he said.

Still, Dutch offshore engineer SBM (>> SBM Offshore) and JGC (>> JGC Corp) of Japan will partner with the Chinese players, including China Offshore Oil Engineering & Construction Ltd.

NewAge expects to sanction both the projects next year.

Last year, China's Wison Offshore & Marine completed the first-ever FLNG ship but it remains unused following the cancellation of a project in Colombia it was intended for.


As typical Western sources of funding have slowed due to the weak state of the shipping business, highly-capitalised Chinese players believe the market has reached the bottom and are keen to step up lending before the cycle turns and pushes up costs.

"The difference is that in the West banks lend at the top of the market when they have most liquidity, but in China they're smarter and put money in at the bottom," a financier who advises Chinese lenders on LNG shipping deals said.

This month, Chinese banks including Industrial and Commercial Bank of China, and Bank of China committed around 1.75 billion to project finance the Coral South FLNG project in Mozambique, bankers said. ICBC declined comment while BOC did not respond to a request for comment.

By contrast Western commercial banks provided just $200 million in uncovered debt to Coral, to be developed by Italy's Eni (>> Eni), instead of an originally proposed $1.9 billion. They cited uncertainties around FLNG technology and a public debt crisis in Mozambique.

Adam Byrne, Managing Director at ING Bank, said Chinese lenders "have very deep pockets indeed".

"If they decide to, they can support something for even a billion or a billion and a half dollars," Byrne told a shipping conference earlier this month.


The next big African deal, in Equatorial Guinea, is being financed by China State Shipbuilding Corp with a $1.2 billion loan for Fortuna FLNG, bankers say. This project - which is being developed by UK-listed Ophir Energy (>> Ophir Energy Plc), shipping firm Golar LNG (>> Golar LNG Limited (USA)) and oil services group Schlumberger (>> Schlumberger NV) - will produce 2.2 million tonnes of LNG a year and is expected to be sanctioned within weeks.

China State Shipbuilding Corp (CSSC) also lent $960 million to Golar LNG in 2015 for the first-ever conversion of a conventional LNG tanker into an FLNG platform, which is set to enter operation this year in Cameroon. CSSC declined comment.

All these projects were awarded to established shipbuilders in South Korea, Singapore or Japan, but the experience sets up Chinese developers to take the lead on other projects in Africa and beyond, say consultants and industry sources.

Equatorial Guinea sees scope for another two FLNG projects, its petroleum minister has said, while BP (>> BP) and joint venture partner Kosmos Energy are also eyeing two in the waters of Senegal and Mauritania.

China also has plans for conventional LNG production in Africa. Chinese conglomerate Poly-GCL has begun construction of an onshore LNG facility in Djibouti which will export Ethiopian gas to China, according to Poly-GCL's website.

(Colin Leopold reports for Project Finance International, a Thomson Reuters company; Additional reporting by Shu Zhang and Brenda Goh in Beijing; Editing by Veronica Brown and David Stamp)

By Oleg Vukmanovic and Colin Leopold

share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news on BP
03:04a China pumps cash into African floating LNG projects in strategic push
06/25 Lee starts firm with a dream
06/24 UK AMBASSADOR : Azerbaijan is not only a major global energy player but also a s..
06/24 BP : Mukesh Ambanis Reliance drops gas price challenge against govt
06/24 BP : Ril-bp drops gas price arbitration against centre
06/23 BP : Final Investment Decision Taken On Rovuma LNG Project
06/22 BP : Patent Issued for Methods, Systems, and Fixtures for Inspection of Gasket W..
06/22 BP : Investments in Azerbaijans oil & gas sector - over $75B
06/21 BP : Investments in Azerbaijan’s oil & gas sector - over $75B
06/21 Faroe Islands looks to restart hunt for oil and gas
More news
Sector news : Oil & Gas Refining and Marketing - NEC
07:11a In disaster's wake, BP doubles down on deepwater despite surging shale
02:54aDJSantos Inks Strategic Relationship with ENN, Hony
06/26 Thirteen EU nations back plan for talks with Russia over gas pipeline
06/26DJEUROPE MARKETS : European Stocks Finish Higher, Helped By Italian Banks, Nestlé
06/26 EU must get more Russian guarantees over gas pipeline plan - Ukraine
More sector news : Oil & Gas Refining and Marketing - NEC
News from SeekingAlpha
06/26 BIG OIL IN THE CLIMATE LEADERSHIP CO : It's About More Than Just The Gas
06/26 Royal Dutch Shell Or BP?
06/21 BP : Positive Progress Derailed
06/21 Oil majors could waste trillions if climate targets reached; Exxon most expos..
06/21 Why BP Is Still A Good Energy Play
Financials ($)
Sales 2017 229 892 M
EBIT 2017 12 157 M
Net income 2017 7 089 M
Debt 2017 37 817 M
Yield 2017 6,76%
P/E ratio 2017 17,06
P/E ratio 2018 14,07
EV / Sales 2017 0,66x
EV / Sales 2018 0,61x
Capitalization 114 610 M
More Financials
Chart BP
Duration : Period :
BP Technical Analysis Chart | BP. | GB0007980591 | 4-Traders
Full-screen chart
Technical analysis trends BP
Short TermMid-TermLong Term
Technical analysis
Income Statement Evolution
More Financials
Mean consensus OUTPERFORM
Number of Analysts 28
Average target price 6,39 $
Spread / Average Target 10%
Consensus details
EPS Revisions
More Estimates Revisions
Robert W. Dudley Group Chief Executive Officer & Executive Director
Carl-Henric Svanberg Chairman
Brian Gilvary Group Chief Financial Officer & Executive Director
Paul Milton Anderson Independent Non-Executive Director
Ian Edward Lamert Davis Independent Non-Executive Director
More about the company
Sector and Competitors
1st jan.Capitalization (M$)
BP-10.16%114 295
CHINA PETROLEUM & CHEM..11.09%104 244
SUNCOR ENERGY INC.-14.14%48 499
More Results