The World Bank will back a $300 million floating liquefied natural gas (LNG) plant in Colombia, international media reported on Tuesday.
A branch of the World Bank, the International Finance Corp. (IFC) will take charge of a $240 million debt financing project with aims to build the world’s first floating liquefaction plant in Colombia, financial news agency Bloomberg reported.
The news follows on the heels of the announcement in April by Pacific Rubiales, Colombia’s most prominent private oil producer, of plans to build an 84 km pipeline in Colombia that will feed to the new LNG plant. Pacific Rubiales is also discussing a contract to supply Russia’s Gazprom from the plant for five years starting in 2015, according to Reuters.
The IFC is financing the Colombian plant as part of a $2 billion investment in energy projects in Central America and the Caribbean basin over the next year, IFC global head of oil and gas Lance Crist explained according to Bloomberg.
The total project cost is estimated around $305 million, “to be financed with up to 80% debt and the balance with equity,” according to a statement of the proposed investment by the IFC. The IFC will loan $75 million for the LNG plant, with the remaining $107 million coming from various lenders who are currently in the transaction process.
Over the next year, the IFC is likely to fund a minimum of $500 million to continue funding the project, with additional financing resulting from other partners, Bloomberg reported.
Pacific Rubiales will collaborate with Belgium’s Exmar NV (EXM) in the operations of the plant.
EXM is a Belgium-based shipping and engineering company, which operates a number of gas carriers and offshore gas industry assets according to the IFC statement. Their market capitalization is listed around US $967 million according to the NYSE Euronext.
The Plant
The liquefaction and storage unit (FLSU) will have a liquefacation capacity of 72 million standard cubic feet per day, producing produce 500,000 metric tons of LNG a year, according to the IFC statement.
The floating project will be located two and a half miles offshore of Tolu, located on the Colombian Caribbean coast near the port of Covenas. Gas taken from the onshore La Creciente gas field located 60 miles away will be liquefied in the plant.
The plant has an operational start date of mid-next year, Crist. The gas will initially be exported to international markets, with the hope of moving to markets in Central American and the Caribbean once LNG import facilities have been established, the IFC statement reported.
“The beauty of this is that it will basically enable Colombia to take advantage of some of its stranded gas and supply it to regional markets,” he said. “In the near term, they will be selling gas to the international market, but now that this kind of supply is available, you will start to see regasification units being built in the Caribbean.”
The plant is currently being built in China, and will be transported to Colombia next year, Bloomberg reported.
Gas will travel to the plant via Pacific Rubiales’s new onshore pipeline that will have a capacity of 100 million cubic feet per day. The pipeline will cost between $150 million and $200 million, according to Reuters.
LNG booming in Latin America; Colombia in strategic position
The LNG market is booming in Latin America. In a statement from Pacific Rubiales in April, the company highlighted Colombia’s abundant and important natural gas resources in particular. “Colombia has sufficient natural gas reserves for the medium term and enormous potential in the long term.”
Global demand for LNG last year was 230.7 million tons, according to Bloomberg. Colombia’s largest private oil producer Pacific Rubiales counts an average output of 129,386 barrels per day, Reuters reported.
MORE: Pacific Rubiales reports record levels of oil production in Colombia
Official projections show Latin America consuming 28.9 tons of LNG by 2025, double the 13.3 million slated for this year, Bloomberg reported according to a forecast by Sanford C. Bernstein.
The use of LNG has increased as the cost and environmental impact of heavier fuels comes into play. “The project promotes use of natural gas, which helps towards lowering greenhouse gas emissions,” the IFC statement said.
However, the environmental angle is not the only one that excites potential suppliers, as the new small-scale, floating LNG plant model set to land in Colombia is an example of a new “market niche” that organizations such as the IFC have high hopes for. “The small scale and mobile nature of such facilities also opens up new opportunities to monetize stranded gas reserves that otherwise would have been uneconomic to develop due to (small) size or (remote) distance to market,” the IFC report stated.
The growth of the small-scale market is distancing itself from the old model of the long-term supplier-receiver contract, presenting a fresh development that would simplify marketing LNG cargo, according to Eduardo Lima, senior VP of project development for Pacific Rubiales as quoted in Latin American business newsource BNamericas.
Sources
- World Bank Funds Colombia LNG Plant Amid Regional Boom (Bloomberg News)
- Pacific Rubiales building Colombia LNG pipeline, will supply Gazprom (Reuters)
- Summary of Proposed Investment (IFC official website)
- LNG expected to drive Colombia gas development (BNamericas)
- Exmar Floating Liquefaction Regasification and Storage Unit (Bv.com)