Angola just had a political transition, but by all accounts that has gone very well. For investment, that bodes well, people can feel like there is some stability.

Eric DUNNING General Manager ALNG Opco

Stride on line

December 22, 2017

Eric Dunning, the general manager of ALNG Opco, talks to TOGY about operations at Angola LNG (ALNG), his perspective on the future of natural gas in Angola and the potential for investment in the country.

ALNG Opco is the company under the ALNG umbrella that is responsible for running the ALNG plant on a daily basis. In September 2017, Angola LNG announced agreements to supply Vitol, Glencore and RWE Supply & Trading. The facility is expected to produce 3.5 million tonnes for export in 2017, a steep increase from 770,000 tonnes in 2016.

On gas policy: “For non-associated gas, there are currently no fiscal terms to monetise that gas, so future development will depend on the Angolan government creating attractive fiscal terms to create the framework for development. The government is working on that, and it is hopefully imminent that they will pass those fiscal terms.”

On investment: “The challenge for Angola is that the country is competing with investment opportunities with other countries across the world. The most attractive opportunities get the investment. The attractiveness depends on resources, product prices, fiscal terms and the cost environment – how costly is it to actually develop projects in the country. Over the years, Angola has had a lot of investment, but there are not many projects on the books right now.”

On feedstock: “The Angola LNG plant is, I believe, the only plant in the world that is fed by associated gas, and there is a lot more variability in gas rates and composition than in a typical LNG plant.”

On coming on line: “The plant has had some setbacks in the past, and we had to shut down in 2014 for some major repairs. We came back on line in mid-2016, worked through some commissioning and start-up issues and by late December 2016, we hit our stride.”

 

Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Eric Dunning below.

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Where are the biggest demand centres right now?
We go all over the world. It goes everywhere but the US at the moment. There is no one destination. Our marketing department actively markets the LNG to get the best available price. Propane and condensate are also sold into the international market, while butane is used locally in the domestic market. We are proud to say that since we came back on line, Angola has become self-sufficient in terms of butane production. This is a pretty big deal because that is what many Angolans use for domestic cooking. The fact that Angola does not have to import butane is very good for the country.

To what extent has the fall in natural gas prices affected you?
It didn’t really affect the operation of the plant per se, but it did put added pressure on us to operate as reliably and efficiently as possible while at the same time reducing our costs. If you look at a typical LNG plant, their cost curves start out at a certain level and over time you drive cost down. In most LNG plants, the initial focus is on making sure the equipment is running properly, the reliability is there and then, once you are in a steady state, you start looking at efficiencies with cost cutting. With the drop in prices, we had to do all of that simultaneously, which is difficult. Finding ways to reduce costs is a big job and trying to do that and get the equipment running properly is a big challenge, but we have been able to do that. We have taken about 40% out of our cost structure since year-end 2014, and we have another 15% or so in our business plan to get us to the level of cost efficiency we are striving for.

What will be the importance of LNG and natural gas to Angola’s energy landscape in the next 10 to 20 years?
I think LNG and natural gas will become an increasingly important part of the energy mix for Angola. For non-associated gas, there are currently no fiscal terms to monetise that gas, so future development will depend on the Angolan government creating attractive fiscal terms to create the framework for development. The government is working on that, and it is hopefully imminent that they will pass those fiscal terms. It will also depend on industry being able to cost effectively bring projects to bear on Angola, but there has to be that environment so people can run the economics, figure out viability and get busy on the implementation. It is not easy, but our shareholders do this around the world every day, so it can be done.

If you were talking to an energy investor looking at Angola, is now a good time to invest in the country?
It has been a challenging environment worldwide because of the price environment. In addition, Angola just had a political transition, but by all accounts that has gone very well. For investment, that bodes well, people can feel like there is some stability. The challenge for Angola is that the country is competing with investment opportunities with other countries across the world. The most attractive opportunities get the investment. The attractiveness depends on resources, product prices, fiscal terms and the cost environment – how costly is it to actually develop projects in the country. Over the years, Angola has had a lot of investment, but there are not many projects on the books right now that I am aware of. There has to be some improvement in one of those factors to attract investment. I am not speaking on behalf of ALNG on this. I am giving you my personal opinion. I worked in the industry for many years. Those are just the fundamentals. That said, I am optimistic and hopeful that the industry will remain vital and more investment will come this way.

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