(Bloomberg) -- As Europe seeks out imports of liquefied natural gas to fill the gap left by Russia, one source of new supply won’t be ready in time for winter.
Straddling the maritime border of Senegal and Mauritania, the Greater Tortue Ahmeyim development could produce as much as 2.5 million tons of LNG a year, just two weeks voyage from Europe. But first gas from the BP Plc-operated site remains elusive after pandemic-related issues and disputes with contractors pushed back the startup from this year to next.
The delay comes amid growing jitters in the global LNG market. Europe still has a huge appetite for the fuel as most of the Russian pipelines that for decades warmed its homes and powered its industries remain shut down. Volatility has returned, with the threat of strikes at key LNG facilities in Australia causing price swings of as much as 40% last month.
“It’s clear that the market needs additional supply volumes,” said Lucas Schmitt, research director for short-term LNG at Wood Mackenzie Ltd. Even if Tortue is relatively small in the grand scheme of things, supply additions next year will be “fairly limited” so any delays contribute to a tightening market, he said.
Tortue is now expected to start gas production in the first quarter of next year, according to BP. It typically takes about three months to go from first gas to first LNG, Kosmos Energy Ltd., a partner in the project, told analysts last month. That would put the first cargo around the middle of 2024.
The delay has several causes. Houston-based McDermott International, which was contracted for subsea work at Tortue, paused work at the site over a payment dispute with BP, according to a person with knowledge of the matter. The company had the equivalent of eight weeks of work left to complete, the person said.
Spokespeople for BP and McDermott declined to comment.
BP has since hired Saipem SpA and Allseas Group SA for the final stretch of work, according to people with knowledge of the matter.
A spokesperson for Allseas declined to comment, while Saipem didn’t respond to a request for comment.
BP is also involved in an arbitration proceeding with Golar LNG, which will provide the production vessel for the field, in relation to “part of pre-commissioning contractual cash flows.” Bermuda-based Golar said the process would not have a “substantial impact” on the project.
Despite the delays, and the fact that Tortue’s output will be just a small proportion of the 96 million tons of the fuel that Europe imported last year, “any new source of uncontracted LNG supply is welcome,” said James Hosie, an analyst at Barclays Plc. “The Atlantic location of Tortue makes Europe the natural export route.”
Senegal has already said it will sell its share of Tortue’s LNG to Europe in the second half of next year. The commitment came after European officials and German Chancellor Olaf Scholz made visits to Dakar in pursuit of gas and renewable-energy projects.
Whether the rest of the gas ends up in Europe will be down to BP and Kosmos, which are also involved in arbitration proceedings over the details of their offtake agreements.
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