Game changer

Floating LNG (FLNG) has been studied for the past 40 years, but, until recently, has remained on the drawing board. However, since Shell took the final investment decision (FID) on its Prelude FLNG project in 2011, a number of operators and FLNG solution providers have followed suit and there are now seven units under construction.

The configuration of FLNG units can be divided into two major groups – offshore and nearshore. Offshore units must operate in open ocean conditions and take reservoir gas directly from subsea wells. Nearshore units, however, operate in relatively benign, inshore waters, and typically take treated or partially treated gas from an onshore pipeline system.

FLNG – the game changer

In assessing the market opportunities for FLNG, it is interesting to look at how the floating storage and regasification unit (FSRU) market has expanded dramatically, with 20 projects developed in just 10 years, and many more under construction or planned. This is an amazing achievement in the LNG industry, which is, historically, very conservative. FSRUs can be regarded as a game changer in the regas sector.

Advantages of FLNG

To be a game changer, FLNG would need to offer significant advantages over traditional onshore liquefaction plants; typically one or more of the following:

• Lower cost.
• Earlier production.
• The option to lease.
• Overcoming land issues.

It is these attributes that have led to the success of the FSRU sector, enabling savings of up to half the cost and half the time in some cases when compared with onshore terminals. FSRUs may also be leased, improving the operators’ cash flow and minimising sunk costs. As mobile units, they also offer the flexibility to relocate in order to match global changes in demand, therefore mitigating utilisation risk.

Lower cost

Capital costs for greenfield onshore LNG plants typically range from US$1000 to US$1800/tpy, depending on location and additional infrastructure needs.

However, gathering accurate cost information on current FLNG projects can be very difficult. Partly, this is due to the fact that they are still under construction, but also because of the energy companies’ reluctance to publish costs. The leasing companies tend to be more forthcoming, with Golar LNG, Excelerate Energy and Exmar all quoting costs of approximately US$600 – US$700/tpy for the Hilli and Gimi conversions, Lavaca Bay (currently on hold) and Caribbean FLNG, respectively. At the other end of the scale, costs in excess of US$2000/tpy have been reported for Prelude, and US$1600/tpy for Kanowit. ThyssenKrupp’s recent benchmarking studies have found that the costs fall into two distinct groups – the leasing companies and the energy companies.

The reasons behind this cost differential have been investigated and demonstrate that the leasing companies focus on a standardised design approach based on proven industry building blocks, which is logical when looking at possible reuse. However, the major energy companies are adopting a conventional, bespoke project design approach, using their own design standards, which is typically more costly. This is not to say that one is right and one is wrong; just that they are different.

It is also important to consider the scope of the quoted costs to ensure a like-for-like comparison. The leasing companies will focus on the cost of providing the FLNG vessel and its moorings only, whereas the energy companies may report the total project cost, including the subsea gathering system and owner’s costs. Another major factor to consider is complexity. A nearshore project, processing lean gas, will have significantly lower costs than a deepwater, offshore project that includes LPG extraction and storage.

FLNG units are currently constructed in the major shipyards in Southeast Asia (newbuilds in South Korea and China, and conversions in Singapore). The efficiency of a shipyard, when working to a fixed design scope, leads to significantly lower construction costs than many onshore locations (e.g. Australia, with high labour costs, or Mozambique, which has little infrastructure and will require a high ex-pat labour and supervision content). The other major advantage is that the cost overrun risk is much lower when compared with in-situ construction of onshore plants, with possible labour issues, difficult weather and issues associated with remote locations. The completed FLNG units need to be towed from the yard to their final location, but this cost is small in comparison with the potential overall cost saving.

Another potential cost saving may be realised by…..

This article was originally published in the November/December issue of LNG Industry. To read the full version of the article, sign in or register for a free trial subscription.

Written by Brian Songhurst and Huw Williams, ThyssenKrupp Industrial Solutions Oil & Gas, UK. Edited from various sources by Callum O'Reilly

Read the article online at: https://www.lngindustry.com/floating-lng/28122015/game-changer-1810/