Floating LNG is drifting along
The market slowdown means floating LNG isn’t moving ahead as quickly as its proponents thought it would
WEAK trade makes it a difficult time to launch the first floating LNG projects. But with several already well down the development slipway, they are coming – whether the world needs them yet or not.
The headline grabber, Shell’s 3.6m tonne-a-year (t/y) Prelude, already mostly built, is due to be on station on Woodside’s Prelude field, off Western Australia, by 2017. But Petronas says its version will be operational sooner: the 1.2m t/y PFLNG Satu will arrive above the Kanowit field, off Sarawak, Borneo, later this year, according to the Malaysian firm. The timetable looks plausible. Petronas said in December the vessel was 95% complete and the company held a naming ceremony in early March, while a contract was recently awarded to a Malaysian firm for “Post-Installation Activities and On-Board Hook-up, Commissioning and Start-Up Activities”, running to October 2016.
FLNG scores over onshore facilities by doing away with the need for expensive infrastructure, such as pipelines and land-based facilities, and because it can be moved between fields over many years. It is ideal for stranded reserves such as Kanowit. But stacking a lot of highly sensitive liquefaction equipment in a moving vessel isn’t easy and FLNG hardly comes cheap. Neither Prelude nor PFLNG Satu is likely to recoup its costs quickly. Market observers expect the much larger Prelude to cost at least $12bn, while PFLNG Satu could cost $1.5bn.
If the facilities last the full 20-25 years the developers claim, then it will look like a smart investment. But the jury is still out. While Prelude is intended to be the first of several large-scale FLNG facilities, Shell and its partners haven’t yet committed to building another. Longer-term doubts are surfacing.
“I don’t think there will ever be anything as big as Prelude again,” says Ben Wilby, an analyst at energy consultancy Douglas Westwood. “It’s such a huge cost and places a lot of reliance on one vessel.”
Speculation suggested Shell would build a giant FLNG facility for Woodside’s struggling Browse project, also off Western Australia. But that idea has been shelved. Spreading the risk and costs across smaller-capacity facilities may look more appealing for future ventures.
Even smaller-scale ideas are struggling. Eager to cut costs, Petronas said in February it was delaying commissioning its second FLNG vessel. The 1.5m t/y PFLNG2 was to have produced first LNG from the Rotan field, off Sabah, in 2018. No revised date has been given.
In February, Canada’s AltaGas said it was halting its small-scale (0.55m t/y) FLNG project near Kitimat, British Columbia after failing to secure enough sales contracts. A planned LNG-export project at the Abadi field, in eastern Indonesia, which Inpex and Shell want to develop as FLNG, remains bogged down in a political dispute over whether it should be developed onshore for local consumers instead.
Norway’s Leif Höegh, a shipping firm, said in early February that it would abandon its FLNG efforts altogether. In East Africa, the timetable for developing Eni’s Coral FLNG project to exploit part of Mozambique’s massive gas reserves has yet to be fixed, raising questions over whether the FLNG facility of up to 3.4m t/y will come on-stream in 2019 as had originally been envisaged (see p33).
But the sector still shows signs of life. UK-based Ophir defied expectations when it announced in January that it had managed to bring Schlumberger – and its funding – into its Fortuna FLNG project in Equatorial Guinea. The companies expect to sign a definitive agreement sometime in the second quarter of this year. Schlumberger is expected to take a 40% stake. The oilfield-services firm clearly believes FLNG has a long-term future: it recently signed a deal with FLNG-specialists Golar to jointly develop the technology’s use.
Golar also wants to build Cameroon’s first FLNG facility by mid-2017 and took a final decision on the project last September. The Bermuda-registered firm is also considering a second FLNG vessel off Equatorial Guinea.
This article is part of an in-depth series on offshore production. Next article: GoM LNG: There she blows.