Flex LNG, already aiming to build the world's first floating LNG plant, plans to sign up buyers for the gas from its second facility next year, but will have to raise more capital to fund all of its projects.
The Norway-listed firm, founded two years ago, has partnered with Rift Oil for a second project in the Western province of Papua New Guinea, after a Nigerian venture with Japan's Mitsubishi Corp.
"We will have an offtaker shortlist in December and a decision in the first quarter," Flex LNG CEO Philip Fjeld told Reuters in an interview on the sidelines of a conference.
The Papua New Guinea plant is expected to produce about 1.5 million tonnes per year (mtpa) of LNG from the third quarter of 2012, Fjeld said. The two companies said earlier this month they were looking to select customers but gave no timeframe.
Floating LNG, or FLNG, projects allow for gas to be explored in areas - onshore or offshore - that are too small to be developed by conventional means. While yet untried, producers hope FLNG plants will take less time to build, roughly three years versus eight to 10 years for conventional onshore LNG projects, potentially creating supplies from early next decade when they will be most needed to meet surging gas demand.
They also hope FLNG will be cheaper than its alternatives. Fjeld said it would cost Flex $550 to $700 per tonne of annual capacity to build a floating LNG project, compared with $1,200 to $1,500 for current onshore projects, which he said was the cost of Woodside's Pluto project.
Flex, which has so far raised $570 million in equity and is debt free, will seek to raise $200 million to $400 million in equity and debt in March, Fjeld said.
"Sure, debt costs have gone up, but there's a lot of it available. Is the price now detrimental to us? Absolutely not," he said, but added the firm may now look for capital from other sources than financial players. "It is time for an increasing amount of industrial player input," he added.
Flex expected to ink a final deal in December for its first project with Mitsubishi, including an offtake agreement for all the LNG supplies for 15 years. Industry sources had said earlier Mitsubishi may not sign a final deal because of concerns LNG projects in Nigeria may be held up as the government indicated it would give priority to domestic supply. Others mentioned financing issues.
"I could spend a day just denying all the rumours," said Fjeld. "The equity final investment decision is due by year-end and I have no reason to doubt that."
Flex's first project, the Progress joint venture, is expected to produce 1.5 million tpa of LNG for 15 years from the second half of 2011 from offshore Nigeria. That would make it the world's first floating liquefaction plant. Flex's other partner in that joint venture is Nigeria's Peak Petroleum Industries. Japanese ship builder Kawasaki Kisen is Flex's largest sharehoolder with a 15-percent stake Royal Dutch Shell and Japan's Inpex are also planning to build floating LNG projects.