FLNG still to lead a revolution

WITH a number of African floating LNG projects back on the agenda, many are wondering if FLNG will still have its day in the sun after it was declared dead, and according to RISC principal advisor Martin Wilkes the answer is an emphatic “probably”.

Haydn Black | 13 June 2017

Speaking in Perth recently, updating an overview of the FLNG niche from several years earlier – a time when FLNG seemed set to make a big splash in the gas world in the wake of the Prelude FLNG sanction – Wilkes said while FLNG had failed to make the great strides expected it was far from being an historical anomaly.

FLNG was originally envisaged as a niche development technology for stranded and smaller gas pools, typically around 1 million tonnes per annum for fields of around 1 trillion cubic feet, although Shell quickly threw out the rulebook with Prelude, and started looking at bigger and bigger projects.

It decided that a “design one, build many” approach could be used, and pushed its FLNG technology towards fields such as Abadi, Greater Sunrise, and Brecknock, Torosa and Calliance.

Yet as Prelude started to take shape in South Korea’s shipyard Shell realised that the cookie-cutter idea wasn’t as simple to put into practice as expected, and eventually the cost savings offered by FLNG started to be eroded.

Orders for a number of other hulls were cancelled, and for a time it looked as if FLNG would be stillborn.

Despite that, Wilkes said FLNG’s benefits are still clear, the technology is still at the start of its growth curve and would probably be embraced with the same fervour that the oil patch adopted floating production storage and offtake vessels in the 1980s.

However, the niche for FLNG still appears to be in smaller and stranded gas pools that cannot be supported with onshore infrastructure for any reason.

One of the smallest developments, the barge-mounted 500,000tpa Caribbean FLNG projects, was technically the first FLNG development in the world, but became a casualty of Pacific Rubiales’ collapse into bankruptcy.

“That project basically fell apart, and as a result the facility’s owners, Exmar, commissioned the barge, but they are still looking for a project,” Wilkes said.

Exmar has since sanctioned a second small facility that is also looking for a home.

Petronas’ started development on two Malaysian FLNG facilities, and it managed to get one into production this year, with the second now likely to be delayed until at least 2020.

Meanwhile, Prelude is now expected expected to start until early 2018.

FLNG is also playing a big role in Africa.

An FLNG development in Cameroon is expected to start as early as September, becoming the world’s second FLNG development.

Golar LNG, now part of the OneLNG consortium, is soon expected to approve the Fortuna FLNG project, offshore Equatorial Guinea in August, following the recent decision by Eni to approve development of Coral South FLNG last week.

Beyond that, no projects have been sanctioned, or look likely to be sanctioned, and more than two dozen projects that were proposed have either dropped off development scheduled or being moved back into onshore developments, such as Browse and Abadi.

Wilkes said one of the issues with LNG is that smaller fields and plants could not support the long-term contracts needed to fund development, and it is more likely they will need to focus on shorter-term contracts.

“Interestingly, the development of the short-term and spot market, that is less than four years, showed that not only is there a stronger LNG market, but there was considerably stronger growth in the short-term market, and that could lead to less reliance on long-term contracts, which then supports smaller resources, so it goes hand-in-hand,” he explained.

That should allow more FLNG developments, to meet short-cycle contracts during the global gas glut, when demand is still expected to growth.

Wilkes said over the past decade LNG growth had been around 5% pa, while the short-term market was growing at 12%.

He said by the end of next year the short and spot market could overtake Japan as the biggest single LNG market segment.

As FPSOs took off in the 1970s and 1980s, floating regas facilities are being built rapidly, expanding the potential gas customer base, and FRSUs are now increasingly cheaper and can be commissioned in as little as six months.

Something similar could happen with FLNG facilities, growing export options globally.

“It has been a big game changer, and I believe FLNG could have the same impact on the upstream side,” he said.

“By 2020 we will have maybe 19-20 countries exporting and 50 counties importing.”

Those figures include Malaysia, Singapore, Russia and the US as both exporters and importers.

Looking into the future, Wilks said because some players were willing to build LNG vessels on spec before finding projects, which could help the FLNG market develop, and new names such as Perenco, Golar and Ophir Energy were entering the gas export market.

“We are going to see more new players into the game and we think it will see a lot of small resources developed,” Wilkes said.

“I think it is poised to be the next generation of the LNG industry, and there will be a lot of vessels out there. The technical challenges have been overcome, and in financing there are people prepared to stump up the cash.”

He believes the world is just at the crest of a wave that could see 50 FLNG facilities operating by 2032.
To view the original article posted on Energy New Bulletin, please click here.

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