At the LNG Ship/Shore Interface, Europe virtual conference, panellists assessed the opportunities and challenges for floating LNG (FLNG) operations, noting that FLNG technology offers a rapid deployment and the ability to develop smaller gas reserves
Exmar managing director for infrastructure Jonathan Raes cited the deployment of the company’s Tango FLNG – capable of producing 0.5M tonnes of LNG per annum – in Argentina within three months of a contract being signed as an example.
Mr Raes said value is derived from the availability of low-cost gas with a balanced composition. Ideally, the FLNG operates in an area with developed infrastructure with existing pipeline and mooring structures. Mr Raes said “If you need to build a breakwater or commit to other mooring solutions this can jeopardise your project.”
BW LNG head of operations, LNG & FSRU Riju Cherian said floating storage and regasification units (FSRU) have become a preferred option in the marketplace.
Mr Cherian said “Given the uncertainty of future demands, FSRUs can be relocated or traded as LNG carriers, unlike onshore terminals.”
BW Group’s own FSRU project at Ain Sokhna on the Suez canal in 2015 was a success with the project taking just five months from project inception to the first gas produced. Yet, as Mr Cherian conceded, this operation’s speed was partly down to the readily available infrastructure and because this was an expansion.
“If a new jetty and facility was required, then five months would not have been possible” he said, noting that some nations have limited capacities coupled with tougher regulatory structures.
“Each project’s considerations are different and it needs to be decided whether an FSRU is the best choice” said Mr Cherian.
When hiring the vessel, charterers should consider both the physical site assessment as well as the project considerations to understand the operational burdens on the vessels. He stressed the importance of Metocean assessments and mooring studies for either FSRUs or FLNGs.
Exmar adopted a cautious approach, Mr Raes said.
“Tango was our first step into the FLNG space so we didn’t immediately go far offshore in a hurricane environment testing the extreme limits. No, we designed it for nearshore conditions, operations have been flawless and now we are ready to push the barriers further," he said.
“The industry as a whole has been operating FSRUs in typhoons and hurricane conditions, so there are lessons learned which can be transposed to the FLNG solutions.”
Energy law specialists Watson Farley & Williams partner Heike Trischmann said the construction of floating modules for regasification has helped open up new markets in untapped locations.
“All these pieces falling into place has created a new wave of LNG-to-power projects” she said.
Going forward, Ms Trischmann said “We will see a standardisation in what it means to provide a low carbon or carbon neutral cargo.” As suppliers look to new markets, including developing nations, they will encounter uncertainty. New markets may be politically unstable and be seen as less credit-worthy, while the energy demand may be much reduced compared to mature markets, causing further problems where producers seek to raise debt financing.
She added that improvements in shipping and increased liquefaction capacity have helped in changing the LNG sales model, making it more flexible and increasing market liquidity.
“Small, modular and flexible is beautiful when it comes to the future of LNG-to-power projects. They could be equity financed more easily because they are cheaper. They could be credit worthy enough for the quantities they take so they don’t require government or utility guarantees,” Ms Trischmann said.
However, she cautioned that the flexibility buyers currently demand may not hold in the near future if the market flips to a sellers’ market “because flexibility is costly and not everybody will be able to do that.”
Mr Cherian said the post-pandemic world will bring more focus on how coal-based projects can switch over to LNG. He foresees an increased demand for smaller FSRUs as new markets open up, especially in locations such as islands where large-scale infrastructure projects have little or no scope.
See the full programme and book your place at Riviera’s LNG Ship/Shore Interface Conference, Europe virtual conference