Why are project developers choosing FLNG?

According to recent research from KPMG, growing demand, high prices, environmental and community challenges and steep costs for the infrastructure of land-based projects, have led several leading LNG players, including Woodside, Shell, Petronas, ExxonMobil and Inpex, to take another look at floating LNG

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KPMG examines ten reasons to choose FLNG. The first five are detailed below:

1. Unlock smaller fields

 

Shell’s 3.6 tpa Prelude project is relatively small by Australian LNG standards; Petronas’ 1.5 million tpa FLNG-1 for the Kanowit field in Sarawak, Malaysia, and Pacific Rubiales’ 0.5 million tpa plant for La Creciente in Colombia are smaller still. These fields would unlikely be economic if developed through conventional land-based facilities. Large oilfields producing significant quantities of associated gas, as in Brazil’s pre-salt of the Santos Basin, are also candidates.

2. Access remote fields

 

Australian fields such as Browse are as much as 425 km offshore, which would necessitate long and costly pipelines to onshore locations. In September 2013, the Browse joint venturers, Woodside, Shell, BP, PetroChina and Mitsubishi/Mitsui, decided on floating LNG, which may include three Prelude type vessels. In September, BHP Billiton agreed with ExxonMobil that FLNG was the best approach for their Scarborough field, in 1000 m of water and 200 km off Western Australia. Arctic environments are a step further, given ice and rougher waters, but considered technically feasible.

3. Avoid onshore ‘no-go zones’

 

Large gas fields have been found in the Eastern Mediterranean, however the surrounding coastlines are heavily built-up with tourism and real estate. Onshore plant locations may face lengthy legal and permitting delays and community objections.

4. Reduce environmental footprint

 

Floating LNG plants do not require long seabed pipelines, dredging for jetties or onshore roads and construction. They save on fuel gas for compression to send gas to shore. After decommissioning, the vessel offers the potential to be relatively easily removed and re-deployed. Bruce Steenson, General Manager of Integrated Gas Programs and Innovation, Shell International Exploration and Production B.V., notes: “In Prelude’s case, the option value is there in that the hull is designed for 50 years with the base case of stationing for 20 to 25 years. So with refurbishment, there is some possible additional value. One potential challenge to be taken into account regarding redeployability is the variance in gas composition by fields.”

5. Deliver projects cheaper and faster

 

FLNG may offer reduced capital costs, particularly once shipyards have gained experience with construction and standardised solutions are employed. There could be substantial improvements in the process of integrating the hull and processing units. Modular components can be constructed at several locations. Onshore construction, marine works and the related high labour costs, in remote or hostile environments, can be minimised. For example, the dredging cost alone for the Wheatstone project in Western Australia – a 17 km approach channel and 26 million m³ of dredged material – is estimated at AU$ 1.5 billion. Savings on such infrastructure, and a simpler supply chain, can mean FLNG projects make it to market faster.


Source: KPMG.