New opportunities for floating lng production

Experts forecast there will be a need for more floating LNG production vessels as the first FLNG field developments takes shape offshore Colombia, Malaysia and Australia over the years ahead. Norwegian shipowners Höegh, BW Offshore, and Golar are among those lining up for this exciting new market. 

The industry expects the number of new offshore field developments to rise in the future, outpacing new shale, onshore and heavy sands. According to Jarand Rystad, managing partner at energy consultants Rystad Energy, new offshore production will account for four times as much new production as shale gas into 2018.


This offshore trend will help fuel the market for floating liquefied natural gas (FLNG) production particularly in areas where there are offshore gas reserves too far from shore to build a pipeline or the costs of building an onshore LNG plant are prohibitive. Rystad believes the FLNG projects will not have the same “richness” as the Floating Production Storage and Offloading  (FPSO) market – which are typically used to develop oil fields – but that it is starting.


“We are seeing the early sunrise of the FLNG business,” Rystad said during INTSOK’s 2013 FPSO Conference in Oslo. “There is stranded gas where FLNG is the only way (for development).”


Three Projects Underway

So far, three projects are under construction. Shell is developing the Prelude field in Browse Basin, Australia, the world’s first sanctioned FLNG project. When completed, it will be the largest offshore floating facility ever built and produce at least 5.3 million tonnes per annum (mtpa) of liquids (LNG, condensate and LPG).


In parallel, Malaysian-state oil company PETRONAS is developing the Kanowit gas field development offshore Sarawak, Malaysia, for start-up in 2015 with a capacity of 1.2 mtpa. But the first to come onstream will be Pacific Rubiales’ La Creciente field development onshore Colombia, which will produce 0.5 mtpa via a leased vessel from Exmar starting in 2014.


These are expected to be the first of many FLNG projects to come. Henning Midttun, an Oslo-based lead analyst for energy consultancy IHS CERA, forecasts there could be 6-8 FLNG projects online by 2018 and USD 8 billion in engineering procurement and construction spending in 2018, with Asia Pacific accounting for the majority of FLNG investments during 2012-2018. Among the future FLNG candidates are GDF Suez’ Bonaparte field and PTTEP’s Cash/Maple, both in Australian waters, PETRONAS’ Rotan field offshore Malaysia, and Inpex’s Abadi offshore Indonesia.


Onshore Possibilities

FLNG facilities can also be used to develop onshore gas fields through near shore developments utilising a barge type solution moored to a jetty. That gives petroleum companies the full flexibility of exporting the LNG and saves the costs of building an onshore LNG plant. Norwegian oil company Statoil, for example, is working with Netherlands-based Pangea LNG on possibly developing the South Texas LNG project using such a solution. That would give them the option of selling the LNG to the Asian market, where gas prices are higher.


Among the suppliers targeting this type of market is Höegh FLNG, which has developed a small-scale FLNG solution (0.5-1.5 mtpa) using barge solutions, both with and without storage. The company is in discussions with several potential partners to establish a portfolio of small-scale FLNG projects. These could typically be used for liquefaction of associated gas from oil production, US and Canada export, and early production from larger gas fields.


“The FLNG market is really developing in two different directions, which is what Höegh has touched upon with their project,” says Midttun. “The first is offshore FLNG, like Prelude, Kanowit, and Tamar (offshore Israel), the other is near shore FLNG, such as La Creciente and Lavaca Bay LNG.”


Future Ventures

Höegh FLNG is also active in the offshore FLNG segment. It currently has a jointly owned company PNG FLNG together with its partners, the state petroleum company Petromin of Papua New Guinea and Daewoo of Korea, with the aim of developing floating production of LNG in Papua New Guinea.


Among its other prospects, Höegh FLNG is in negotiations with an Asian national company on a project offshore Australia. The company is hoping to bring the project to a final investment decision by 2014, as well as secure additional partners in its newly formed subsidiary Höegh FLNG. 


Golar LNG is similarly seeking new investors for its planned spin-off Golar FLNG. However this new venture will focus on converting three LNG carriers into FLNGs rather than newbuilds. The company has previously done successful conversions of its LNG fleet into Floating Storage and Re-gasification Units (FSRU).


Golar FLNG is targeting projects with pipeline quality gas and unconventional natural gas reserves such as coal bed methane and shale gas or clean and relatively dry gas sourced from offshore or near-shore fields. The company expects to complete conversion of the first vessel in the first quarter of 2015 and is currently in discussions with Douglas Channel LNG in British Colombia, Canada.


“The board sees particular opportunities in the African region, where gas prices remain low,” said John Fredriksen, Golar chairman, after awarding Keppel Shipyard the conversion contract in October 2012. “Significantly, large quantities of gas are currently being flared and the infrastructure doesn't naturally support large land-based LNG investments.”


Another key player is Norwegian FPSO operator BW Offshore, which signed a memorandum of understanding in January 2013 with Pangea LNG regarding the King FLNG project for the Tamar and Dalit gas fields offshore Israel. BW Offshore will take the role of owner engineer under the development phase on behalf of Pangea LNG, with the aim of having King FLNG onstream in 2017 if a final investment decision is taken end 2013. BW Offshore and Pangea are also discussing operator role and potential ownership share. 





Caption: Hilli, one of the Golar’s three LNG carriers planned for possible conversion into a FLNG vessel.

Credit: Golar LNG



Caption: The Asia Pacific will drive FLNG investments in the short term.

Credit: IHS


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