05 augustus 2022
18:03
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The Belgian gas carrier company Exmar sells its unfortunate LNG factory Tango FLNG to the Italian ENI. The unemployed Tango once brought Exmar to the brink of bankruptcy.
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Exmar has signed a contract with the Italian energy group ENI for the sale of the Tango FNLG, a 144-metre-long floating platform that can convert natural gas into liquefied LNG on board for reshipment.
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The retail price ranges from $572 million to $694 million depending on Tango’s performance in the first six months of its launch. ENI will deploy Tango in the Republic of Congo.
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Earlier this year, Exmar had indicated that therefar-reaching negotiations‘ ran in three parties. But that Exmar is selling its Tango is a surprise. Everyone thought it was out for a new lease. ‘It was a no-brainer’, says Jonathan Raes of Exmar, ‘when you see the amount we received for the ship.’ The capital gain from the sale is estimated at $300 million.
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Exmar has also signed a contract with ENI for the charter of a floating storage vessel (FSU) for ten years and will also earn money from this. The FSU will be located next to the Tango as additional storage space on the water. Exmar will also provide operational services and maintain Tango and the FSU. It has not yet been decided which LNG ship from the Exmar fleet is eligible for conversion. Chances are it will be the Excalibur.
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The interest in Tango is no surprise. The situation is now very different from 2020, when the then client to which Exmar had leased Tango, the Argentine YPF, dropped out. Back then, the price of LNG was extremely low, around 2 to 3 dollars per mmBtu (million British thermal unit, unit of energy). Now the price has risen to an average of 7.7 dollars (on the American stock exchange) and 60.6 dollars on the Dutch TTF exchange, the reference for Europe.
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The high LNG prices and the strong demand for LNG in Europe make platforms such as Tango very attractive. Tango is also one of the few of its kind that can be deployed quickly.
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Relieved
Exmar will undoubtedly be relieved that Tango can be deployed again. The search for customers for the infamous floating natural gas plant was anything but smooth sailing.
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Exmar had Tango built in China for $350 million years ago, but the customer for whom it was built, Canadian oil and gas company Pacific Rubiales, ran into financial difficulties in 2005 and pulled out. A big problem, because Exmar had not covered itself and did not receive a severance payment.
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Tango nevertheless had to become the showpiece and cash cow of the group. But the heavy debt burden of the unemployed colossus after the Pacific Rubiales dropped out pushed Exmar to the brink of collapse. Owner Nicolas Saverys had to sell several Exmar ships to keep afloat.
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‘We were almost dead’, said Saverys in a candid interview, when in 2018, only three later, he found a new customer for his Tango: the Argentine state-owned company YPF. The energy company would use the colossus for ten years to liquefy Argentine shale gas from Patagonia – which would be brought via pipelines to the port of Bahia Blanca – on board Tango and then export it.
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Force of the majority
But at the end of 2020, YPF also announced that it could not fulfill its obligations. The Argentines invoked force majeure and referred to the impact of the corona pandemic, the financial crisis in Argentina and the low gas price. Fortunately, Exmar had now covered itself and it was agreed through arbitration that YPF would pay 150 million dollars to get out of the lease early.
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For export, natural gas is first converted into liquid LNG by cooling it to minus 162 degrees. That will happen at ENI at the Tango. It then goes into an LNG ship that transports the LNG by sea. At the final destination, the cold liquid is regasified in terminals on land – such as Fluxys in Zeebrugge – or in regasification vessels along the coast, which then pump it into the grid via a pipeline.
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