LNG World Shipping

Time is nigh for floating LNG production

29/11/2013
Taken from: LNG World Shipping /Offshore LNG Nov/Dec 2013

The commercial production of LNG on a floating vessel is edging nearer. The development will bring the LNG industry full circle, for the first ever LNG cargoes – several transatlantic trial shipments to the UK in 1959 – were produced on a floating barge stationed in the Louisiana bayous near Lake Charles.

Which of the three floating LNG production (FLNG) vessels ordered to date will be the first to enter service is a moot point. Shell contracted the first LNG ‘floater’ in May 2011, a 488m-long vessel which Samsung Heavy Industries is building for the Prelude project off Australia’s northwestern coast. What will be the world’s largest manmade structure upon completion embraces many groundbreaking technologies and will not be ready to enter into service until early 2017.

A more modest newbuilding is the 300m-long FLNG vessel that Petronas ordered at Daewoo Shipbuilding and Marine Engineering in early 2012 for what it terms its PFLNG 1 project. The scheme calls for the vessel to be positioned in shallow water about 180km off the coast of Bintulu in the Malaysian state of Sarawak in order to liquefy gas from the Kanowit field. In contrast to the Prelude LNG production capacity of 3.6 mta, PFLNG 1 will be able to liquefy 1.2 mta. The Malaysian unit is scheduled to commence LNG production in late 2015.

The smallest of the three FLNG vessels under construction is that being developed by Exmar for charter to Pacific Rubiales and positioning at Tolú on Colombia’s Caribbean coast. The non-propelled vessel, termed a floating liquefaction regasification and storage unit (FLRSU), was ordered at the Wison yard in China in June 2012 and is scheduled to be providing LNG, at a rate of 0.5 mta, by the second quarter of 2015.

On paper it looks like the Exmar FLRSU will be the first past the finishing line. However, the contenders will not be claiming a place in the history books until the first cargo from their floater is transshipped. Experience has shown that it is best not to count your chickens before they hatch.

What is certain is that these first three FLNG projects will be the first of many. Floating production is poised to follow the pattern established by the LNG industry’s floating regasification projects in recent years. There are now 14 floating storage and regasification units (FSRUs) in service, 12 on order and shipyards hold options on many further such vessels. Although the FSRU fleet is still relatively small, it is currently expanding at a rate of 37 per cent per annum, according to Höegh LNG.

The rapid takeup of floating regasification by the LNG industry has shown how quickly innovative technologies can be adopted and accepted. Just as importantly, floating regasification has been quick to prove that major cost savings can accrue from offshore solutions. When the regasification cost element of delivered gas via an FSRU comes in at one-third that of gas processed at a shore-based import terminal, the benefits are not difficult to appreciate.

The US and Australia each have eight FLNG schemes on the drawing board. The developers of the majority of these projects are currently engaged in preliminary engineering work with a view to commissioning full front-end engineering and design (FEED) studies in 2014. A successful outcome, along with the necessary permits and gas sales agreements in place, would enable a final investment decision (FID) to be taken in 2015 and their projects to transship the first LNG to delivery tankers in 2018.

Most of the US and Australian initiatives are based on floaters with relatively large, single train liquefaction capacities, of 3-4 mta, to enable the export of sizeable quantities of gas. The US projects, for example, are competing with numerous shore-based terminal schemes to export the same shale gas resources.

In Australia the offshore fields targeted by the FLNG community hold significant reserves, and floating production offers a lower cost, fast-track alternative to the construction of a shore-based export terminal. The US and Australian projects are examined in detail in articles on pages 10 and 13, respectively.

Shell is a partner in a number of Australia’s prospective FLNG developments, and in these cases the energy major’s Prelude technology has been chosen as the route to project realisation. The concept is based on solid foundations, Shell having researched its FLNG options for 15 years and devoted 1.6 million man-hours to work on the engineering challenges before deciding on the Prelude design and equipment.

Prelude will be moored using the world’s largest turret yoke arrangement 200km from the nearest land off Australia northwest coast, an area prone to seasonal cyclones. The Prelude FLNG vessel has been designed for not only an uninterrupted service life of 20 years at this location but also a further 20 years at another offshore gas field that may need to be developed in future.

Making the Prelude concept more widely available will be facilitated by the fact that Shell has entered into a master service agreement with Technip and Samsung covering the design, construction and installation of multiple FLNG facilities over a period of up to 15 years.

Smaller scale units are also well represented amongst the FLNG schemes under development. It is estimated that there are over 650 remote offshore fields worldwide with between 0.5 and 5 trillion cubic feet (tcf) of stranded gas that would be ripe for development with small-scale, barge-mounted liquefaction plants.

The combination of liquefaction plants of modular construction and simple barge-shaped hulls, especially when the facility is moored in nearshore waters, helps ensure that the investment cost per tonne of LNG produced is much below the equivalents for both a large-scale FLNG project and a shore-based export terminal. Exmar’s small FLRSU, for example, is expected to cost US$300 million, complete with topsides.

The Exmar FLRSU, which is due to be positioned at a dedicated jetty located 3km off Colombia’s Caribbean coast, is illustrative of the effect such a vessel can have on a region’s LNG supply chain. The FLRSU will work in tandem with a floating storage unit (FSU) also moored at the jetty, transferring LNG to the FSU as it is liquefied.

It is likely that initially the terminal will export full LNGC cargoes of 140,000-160,000m3, depending on the sizes of the FSU and the delivery tanker, to the international spot market once every six weeks. Eventually, once the region’s customers have their LNG receiving infrastructure in place, the FLRSU will supply the small-scale power generation markets of Central America and the Caribbean using coastal LNG carriers.

Exmar has established a strategic alliance with Black & Veatch, the supplier of the FLRSU’s liquefaction plant technology, and Wison, the builder of the vessel, to explore further opportunities for the small-scale FLNG technology the partnership has developed.

One of the principal advantages of the FLNG approach to bringing LNG to market is that the entire vessel can be built under controlled conditions by experienced and skilled workers at a dedicated yard. In doing so the cost overruns, construction problems and inclement weather conditions often encountered at shore terminal building sites can be avoided.

Australia, a high-cost country for plant construction work, highlights some of the perils attendant on building shore-based LNG terminals. The six shoreside LNG export projects currently under construction in the country have gone over budget by an average of 25 per cent.

Yard construction of an FLNG vessel also enables the building schedule to be accelerated through replication and efficiency shortcuts, again to the benefit of the overall budget. Financing arrangements are usually facilitated by yard construction and the overall project will benefit from the lessons learned from previous projects of a similar nature.

Besides the three floaters under construction and the US and Australian initiatives, many other FLNG projects worldwide are moving ahead. Petronas is poised to move on its second development, PFLNG 2. This is a 1.5 mta floater project aimed at monetising the gas resources of the Sabah field. Like the PFLNG 1 field, this deepwater deposit is also located off the coast of Sarawak and the proposed timetable calls for the first LNG cargoes to commence loading by late 2016.

Another country whose FLNG aspirations are beginning to materialise is Israel. Large deposits of gas have recently been discovered in Mediterranean coastal waters, enough to supply both the domestic and export markets. Gazprom has recently signed up to purchase the output from a 3 mta FLNG vessel that would be built in Korea and stationed over the Tamar field, off the coast near Haifa. The sale and purchase contract calls for shipments to commence in 2017 and extend over a period of 20 years.

The LNG supply chain is currently undergoing a dramatic extension, at both the upstream offshore and downstream small-scale ends, in much the same way that the oil supply chain did 50 years ago.

The first oil floating production storage and offloading (FPSO) vessel went into service in the 1970s and there are now 187 such vessels in service. FPSOs account for two-thirds of the floating production units utilised by the oil companies to bring offshore reserves to market.

Because not many new onshore oil fields of any note are being discovered, the oil industry is placing more emphasis on offshore developments than ever before. There are 43 oil FPSOs currently on order worldwide and about 165 FPSO projects in the planning phase.

While the LNG industry will never match these kinds of numbers with its own FLNG efforts, the trend in offshore developments established by the oil companies provides an indicator that floating LNG is in for a bright future. The foundation FLNG vessels are currently under construction and a raft of investment decisions on new projects is imminent. The only way is up. LNG

 

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