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Hemla Vantage in line for Iran FLNG first

Norwegian player set to be part of joint venture deal to supply vessel to produce flared gas in Persian Gulf

Hemla Vantage of Norway is set to secure a potential $600 million joint venture deal in Iran to supply a floating liquefied natural gas facility to liquefy and export gas currently being flared at oilfields in the Kharg Island region.

Senior company and Iranian officials told Upstream that Hemla effectively has the contract, but a final signature is still awaited.

Assuming the project goes ahead, the FLNG vessel would be the first of its kind in Iran. It is intended to liquefy 200 million cubic feet per day of gas from offshore oilfields in the northern Persian Gulf, producing 500,000 tonnes per annum of LNG and 200,000 tpa of liquid petroleum gas.

In Tehran, National Iranian Oil Company (NIOC) managing director Ali Kardor told Upstream that Hemla “has the project”.

However, a contract has yet to be finalised, Iranian officials and Hemla director Gerhard Ludvigsen confirmed to Upstream.

Sources said they were hopeful that could happen "within weeks".

Hemla is understood to be planning to lease the FLNG facility that will be used for the Iranian project.

The company is planning to carry out the project through a 50:50 joint venture with local semi-state-owned Kharg Petrochemical Company (KPC). Hemla is set to operate the scheme, and the agreement is planned to last for 15 years.

Financing for the scheme could come from German and other European finance houses, according to sources.

Talks between Hemla and Iran have been going on for some time, with a memorandum of understanding being signed early last year.

Iran is one of the world’s biggest gas-flaring oil producers. A previous attempt two decades ago to harness flared gas in the Kharg region, with financing from the World Bank, was abandoned under pressure from the US.

Iran this year finalised new foreign investment rules under the Iran Petroleum Contract formula for foreign companies, offering them more attractive terms than under the previous Buy-Back formula.

Earlier this year, NIOC also announced it would supply flared gas at subsidised prices to companies willing to invest in production facilities.

Details on the gas supplies for the FLNG unit are not available, but may involve a tolling arrangement.

KPC was established by the National Petrochemical Company half a century ago in partnership with Amoco of the US, and specialised in recovering propane and other products from flared gas at offshore fields.

Last year, Hemla signed an MoU with Tamin Petroleum & Petrochemical Investment Company (Tappico) to “work together through a joint venture to identify mature projects”. Details are not available. Tappico is an investment unit of the national Social Security Organisation.

The FLNG facility would be Iran’s first foray into gas liquefaction for export. NIOC had three big LNG proposals, each with a capacity of at least 10 million tpa, under negotiation with the likes of Total and Shell earlier this century, but abandoned all but one scheme following the tightening of US sanctions.

Officials say they will complete that one, Iran LNG, with probable technological help from Germany’s Linde and Statoil of Norway.

Considerable sums have already been spent on infrastructure and basic facilities for Iran LNG at Bandar Tombak, but there has been little or no site work for years.

The introduction of floating liquefaction facilities may further delay plans for Iran LNG.