Wood Mackenzie claims that, despite its small share of the total LNG market, FLNG has generated outsized interest in recent years. In a world that requires tight capital disciple, Wood Mackenzie claims that FLNG offers lower capital investment and manageable costs, especially in frontier locations.
Nonetheless, Wood Mackenzie’s latest review of the global FLNG sector suggests that future project opportunities are in short supply, as FLNG competes for capital and buyers in a busy LNG market.
Liam Kelleher, research analyst, Global LNG, said: “The post-2014 oil price crash and the view that the LNG market was oversupplied saw sanctioned volumes of new-supply LNG drop considerably between 2015 and 2017. Throughout these stagnant years, FLNG was a bright spot in the market and gained industry confidence – three of the seven major projects to take FID between 2015 and 2018 were FLNG developments. Furthermore, the first FLNG cargo was shipped in 2017 with three projects now operational.”
Nevertheless, Wood Mackenzie claims that it has not been plain sailing for the FLNG sector, arguing that there are still a number of challenges to overcome. Governments are concerned by the transfer of jobs to foreign shipyards during construction and to offshore workers during operation. Reportedly, this has seen them focus on onshore developments as opposed to FLNG units. For instance, projects such as Abadi (Indonesia), Greater Sunrise (Timor Leste/Australia) and Tanzania are all proof of this trend.
Kelleher added: “The significant reduction in exploration expenditure since the 2014 price crash has yielded few suitable new gas discoveries. Many of the projects touted as prospective FLNG developments have been in the limelight for a number of years. LNG FIDs recently have favoured high-capacity US onshore projects with lower capital and operating costs.
“We expect this trend to continue, with high-capacity projects in the US, Russia, Qatar and Mozambique looking to take FID. The lack of economy of scale is likely to limit FLNG projects to small scale and remote developments as it competes for buyers, financing and partners in a busy LNG marketplace.
“FLNG has established itself as a credible development option and – with further experience and cost reduction – further projects may quickly appear in an otherwise quiet FLNG FID outlook.”
Read the article online at: https://www.lngindustry.com/floating-lng/30012019/wood-mackenzie-releases-flng-report/