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IOCs eye Petronas' 'plug and play' FLNG

Petronas says they already have interest in their plan to charter FLNG vessels to IOCs

Malaysian national oil company (NOC) Petronas could charter its pioneering floating liquefied natural gas (FLNG) production vessels to international oil companies (IOCs) once it has proven the viability of the emerging technology. Petronas says that it has already received interest from some IOCs.

The Kuala Lumpur-based company is set to commission the world's first FLNG unit at its Kanowit field in the shallow waters off Sarawak in Malaysia in early 2016. The field, which is already producing gas, will be a testbed for the novel technology.

Petronas' biggest competitor will be Shell's huge Prelude FLNG project, which is due to start producing off the coast of Australia in 2017. Petronas' FLNG1, though, will be much smaller and more agile, meaning it can more easily move from field to field, Dr Colin Wong, chief executive of Petronas' refinery and petrochemical arm, told LNG Insight. 

The floater, which can handle 1.2m tonnes per year (t/y) of liquefied natural gas (LNG), as well as condensates, will cost about $1 billion and produce around 180m cubic feet (cf) per day, said Wong. 

On a per unit cost basis the FLNG1 scheme will be more expensive than onshore production plants, but Wong expects costs to come down as the technology matures. The maiden unit will produce gas at a cost of about $10/m British thermal units, he added.

Although the vessel will first be deployed in shallow waters, it will also be able to operate in deeper waters with modifications to its turret system, which anchors the floater to the seabed. 

FLNG1, the first of two floaters being built by Petronas, will spend its first five years at Kanowit. After that it will be moved to tap other marginal or stranded gas fields in Malaysian waters. "We don't have plans to move it outside Malaysia, but we have that flexibility," noted Wong.

Malaysia has plenty of fields with less than 1 trillion cf of gas, which are too small to justify the cost of building pipelines to onshore facilities and were considered stranded, until now. The gas from the floater, which weighs around 132,000 tonnes or the same as six LNG carriers, will be either exported or shipped to gas-short Peninsular Malaysia, depending on where Petronas can fetch the highest price.

For international companies working in Malaysian waters, Petronas' FLNG units could offer greater freedom too. "If they don't wish to tie into existing pipeline networks, FLNG provides an option to monetise their own gas, which offers a lot of flexibility to our production sharing contract players," said Wong. 

Wong added that Petronas is not discussing leasing the 'plug and play' FLNG units just yet, but if 'in future there is an opportunity and they are willing to pay a high tolling fee, then there is no reason why not'. He said the NOC would also consider leasing the vessels out to third party operators if the returns were attractive.

Adnan Zainal Abidin, vice president of global LNG projects at Petronas, made it clear that the primary focus is to prove the success of the technology by successfully monetising the fields at Kanowit and then Rotan before embarking on other commercial ventures with external partners. 

Petronas' second floater, FLNG2, which has a larger capacity of 1.5m t/y and will be capable of operating in water depths up to 1500 metres, will be commissioned in the first quarter 2018 at Murphy's deep-water Rotan field off Sabah.

Malaysia has been aggressively trying to reverse declining gas production, and while this has led to several new and significant gas discoveries, FLNG technology opens the opportunity to monetise gas from remote marginal and stranded fields, which would otherwise be uneconomic to develop conventionally. 

FLNG has also been touted as a solution to monetise undeveloped gas finds elsewhere in Southeast Asia, particularly in Indonesia and Papua New Guinea.

Malaysia is the world's second largest LNG exporter after Qatar. Petronas operates eight LNG trains onshore with some 26m t/y of capacity. But the start-up of a ninth train and the FLNG1 unit next year should boost production levels to near 30m t/y. 

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