Korea's flagship credit agencies and companies joined their hands for the Coral South FLNG* Project in Mozambique. The entities participating in the project are Korea Gas Corporation ("KOGAS"), Samsung Heavy Industries ("SHI"), the Export-Import Bank of Korea (“Korea Eximbank”) and Korea Trade Insurance Corporation ("K-sure") as a sponsor, as a contractor, and as financial providers, respectively.
* FLNG or Floating LNG facility refers to an offshore LNG production facility enabled for pretreatment, liquefaction, storage and offloading of LNG. It has emerged as the new platform for natural gas field development.
** PF (Project Finance) : Project finance is the long-term financing of infrastructure and industrial projects secured by the project assets and paid from cash flows in contrast to traditional corporate loans secured by the credit worthiness of project sponsors.
Korea Eximbank (www.koreaexim.go.kr, Chairman Choi JongKu) announced on June 1 that it would provide USD 1 billion in project financing for the Coral South FLNG Project, the largest gas field development project in Coral Field, Area 4 located in offshore Mozambique.
KOGAS, which owns a 10% stake, participates in the project as one of the sponsors along with Eni, an Italian energy company; Exxon Mobil of the U.S.; and National Petroleum Corporation (“CNPC”) of China. The consortium* of the project composed of SHI, etc. has been selected as an EPC contractor.
* France Technip, Japan JGC
Korea Eximbank and K-sure decided to provide USD 1.8 billion (22.5% of total project costs or 36% of project finance) for the project, each supporting USD 1 billion and USD 0.8 billion, respectively. This financing is the first-ever PF extended to an FLNG project in the world. Attracting global attention, Korea Eximbank and K-sure played a leading role among financing providers including five Chinese Banks, ECAs of Italy and France, and other global financial institutions participating in the project.
This financing is expected to set a foothold for Korean shipbuilding companies, which are currently going through hardships, to successfully win the bid.
In this project, KOGAS and its partner investors, Eni, CNPC, Portugal's Galp Energia (“GALP”) and Mozambique’s Empresa Nacional de Hidrocarbonetos (“ENH”), will be in charge of developing and producing LNG from the Coral gas field in Area 4 as well as building and managing the FLNG.
Back in 2007, KOGAS had discovered some 85 TCF of gas in Area 4 with other global natural resources development companies. With the financing, the project will finally allow KOGAS to produce and sell 3.37 million tons of LNG every year for 25 years starting from 2022 when this project is completed.
As the EPC contractor, SHI will utilize its know-how accumulated over many years to build the FLNG facility. Also, it is expected that the project will have an influence on creating more jobs in Korea since SHI will build the vessel domestically with the participation of more than 1,000 Korean SMEs. Also, SHI is expected to retain the employment totaling 2,300 people per annum, and acquire foreign currency as the rate of foreign exchange earnings is anticipated to exceed 70%.
The project is also forecasted to contribute to the development of related industries as maritime plant orders are likely to be secured in advance when oil prices will recover.
Korea Eximbank’s official remarked, "As the world’s first and biggest gas field project in the century, the Coral South FLNG Project is soon to be implemented at a time when petroleum gas prices show signs of recovery. For this project, Korea Eximbank and K-sure played a key role in negotiations with stakeholders." He added, "Amid an unprecedented drop in petroleum gas prices, Korea Eximbank continued to be a firm supporter for Korean companies. We will further strengthen its leading role in promoting natural gas development and maritime plant projects for Korean companies.”
