Iran, Norwegian Company to Sign FLNG Unit Deal

Iran will sign a contract with a Norwegian oil and gas company in the next few days to build the country’s first floating liquefied natural gas (FLNG) unit in the Persian Gulf, the managing director of the National Iranian Oil Company said on Friday.

“NIOC plans to sign a deal with Norway’s Hemla Vantage next week, based on which the European firm will construct an FLNG unit with a production capacity of 500,000 tons per year,” Ali Kardor was also quoted as saying by ILNA.

An FLNG facility is a seaborne structure that would produce, liquefy, store and transfer LNG at sea before carriers ship it directly to markets.

"The contract will allow the Norwegian firm to operate in Iran's market for 20 years," the official said without providing details. Hemla embraces the value chain of oil and gas with focus on LNG. It has been structuring oil and gas projects in the US, West and East Africa, Southeast Asia and the Mediterranean with renowned partners in the industry.

Financial Times quoted Gerhard Ludvigsen, a founding member of Hemla Group and the managing director of Hemla Vantage, as saying last year that the company was closing in on a $600 million contract with an Iranian petrochemical group, the Kharg Petrochemical Company, to produce and export LNG and LPG by 2017.

“Hemla will secure debt financing and will be 50/50 equity partners with KPC/KGRC [the latter is a sister company of the former],” said Ludvigsen. According to FT, the joint venture will purchase 5.66 million cubic meters of flared gas per day from offshore fields near Kharg Island over a period of up to 15 years.

In its first phase, the site is projected to produce 500,000 tons of LNG and 200,000 tons of LPG per year. The FLNG barge, produced in China, will be leased from Exmar, a Belgian company. Iran has close to 34 trillion cubic meters of natural gas reserves, which is around 18% of the global gas reserves. It has been working on several major LNG projects for years to convert its rich gas reserves into revenue but to no avail.

The country exports all of its gas through pipelines to neighbors in the north and the west, but has failed to capitalize on the increasingly lucrative LNG market.