The emerging floating LNG (FLNG) market has been one of the most radical offshore trends of this decade, moving from the drawing board to the fabrication yard (admittedly after several decades of conceptualization) in just a handful of years.

It is being driven by two main factors. One is the continued growth in the world’s population, which along with further GDP growth in the major developing economies is expected to see global energy demand surge by around 50%. The other is that, while oil’s percentage share of the overall energy mix is declining (although rising in actual terms), the largest growth will be in gas consumption.

Gas is the outstanding fuel for power generation, with gas-fired power plants having the lowest capex, while producing less than half of the CO2 emissions of coal. It is also relatively cheap and there are abundant reserves. According to the International Energy Agency (IEA), there is enough to last 230 years at today’s consumption levels.

A succession of giant gas finds in remote offshore provinces ranging from the emerging frontiers of the Eastern Mediterranean to the outstanding resources off the east coast of Africa and the west coast of Australia all largely offer the same challenges: Significant distances from potential markets and – unlike oil – being too expensive to consider transporting via pipeline.

The conditions were in place, therefore, for the rise of FLNG as a viable field development solution. Floating liquefaction first saw development in the 1970s, but it was only at the start of this decade (May 2011, in fact) that Shell was the first to take the plunge and commit to the development of its Prelude gas field offshore Western Australia. The field was only discovered in 2007.

This is the most well-known of the first generation of FLNG facilities destined to start up in this decade, with FLNG’s inherent advantages – eliminating the need for fixed production platforms linked by pipeline to shore; providing more secure operations than onshore plants in regions of potential unrest; offering a solution for dealing with associated gas from remote offshore oil fields – all now recognized as viable and achievable.

Many others have or are in the process of following suit. The predicted growth for the global FLNG market is astonishing, with expenditure expected to rise from ‘just’ US $3.7 billion (for the period 2007 to 2013) to $64.4 billion (2014-2020), according to analyst Douglas-Westwood.

According to the analyst, about two thirds of the total spend is attributable to liquefaction infrastructure, while the remainder is from import and regasification facilities. Australasia accounts for the largest proportion of global capex at 30%, driven by its queue of liquefaction projects with a forecast expenditure of $19 billion between 2014 and 2020.

Year-on-year growth between now and 2020 is forecast to average 64% per annum, and the analyst expects this rise to be more pronounced after the successful startup and operation of the first wave of FLNG vessels, namely Shell’s 5.3 MMtpa Prelude unit in the Browse Basin (likely to be onstream before the end of 2016), and also Petronas’ smaller 1.2 MMtpa PFLNG 1 unit offshore Sarawak, Malaysia (planned for startup by the end of 2015). The former’s design, construction and installation is being undertaken by a Technip-Samsung consortium, while the latter is under construction at the Daewoo Shipbuilding & Marine Engineering (DSME) shipyard in South Korea.

Size is a factor in FLNG thinking. Thierry Milatec, a lead process engineer at Italy’s Saipem, has worked on another FLNG project, Inpex and Shell’s Abadi facility destined to work offshore Indonesia. Speaking at the Australasian Oil & Gas conference in Perth, Australia he pointed out that an FPSO might normally be around 300 m (984 ft) in length, while a large scale FLNG vessel is closer to 500 m (1,640 ft). “And a 100 m (328 ft) increase in length means you can essentially double the production levels,” he said.

Inpex recently awarded parallel contracts for the FEED of the Abadi facility, with one going to a JGC Corporation/PT JGC Indonesia consortium, and the other to a PT Saipem Indonesia/Saipem consortium. The eventual winner will progress into a full FLNG EPC (engineering, procurement and construction) phase.

A further FLNG unit has also been chosen by Malaysia’s Petronas for its second such project in its domestic waters. It has issued a design, build and installation contract for the 1.5 MMtpa ‘PFLNG 2’ unit, to be located in deepwater off the coast of Sabah on the Rotan field in Block H, with startup planned for early 2018.

The engineering, procurement, construction, installation and commissioning (EPCIC) contract went to a consortium of JGC Corp., Samsung Heavy Industries Co. Ltd., JGC (Malaysia) Sdn Bhd and Samsung Heavy Industries (M) Sdn Bhd.

Petronas stated that, once operational, both its PFLNG facilities are expected to “change the landscape of the LNG business.” As such, it added, the facilities will play a significant role in the company’s efforts to unlock Malaysia’s remote and stranded gas reserves.

There are also other projects in process for Australia – Woodside wants to use Shell’s FLNG technology as the development concept for developing its Browse gas fields off Western Australia via not one but three FLNG facilities, while ExxonMobil and BHP Billiton are also pursuing FLNG as the preferred solution for their Scarborough field also off Western Australia.

Elsewhere, the eastern Mediterranean has Noble Energy, Woodside and its partners progressing towards the use of an FLNG unit for the second development phase of the producing Tamar field offshore Israel, while a further unit is expected to be employed on the giant neighbouring Leviathan field, the world’s largest offshore gas discovery of the last decade. A third unit is also being considered for the development of another large gas field (Cyprus-A) close to these two fields in Cypriot waters.

Off Africa’s east coast, Italy’s Eni and its partners are considering an FLNG solution for monetizing part of their giant gas reserves off the coast of Mozambique, while off Africa’s west coast Ophir Energy has shortlisted bidders to supply it with a leased FLNG unit for its deepwater gas resources in Block R off Equatorial Guinea.

Note: The Prelude FLNG image is courtesy of Shell.

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