Developing FLNG projects can be equated to herding cats, it is not a simple task. Many different approaches are taken, some come close, others do not and so far only a few have crossed the FID starting line. With so many variables that are outside of the control of any single organisation or individual, it is prudent to focus instead on the key variables that can be influenced/controlled by parties working towards achieving FID on their development. Even so these are numerous, but for this brief article the headline items can be considered to be the following:
1. Have credible partners - LNG and FLNG projects by their nature are most likely to succeed if the load is shared. Joint ventures or consortium approaches become suitable. But when building the JV or consortium it is important to pick your partners correctly. Onshore experience is not applicable to the offshore world, likewise offshore only experience is not suitable when looking to produce LNG. There are few credible partners who are able to bring the necessary combination of offshore and LNG capabilities as well as FLNG experience that are required for the technical scope to be successful.
2. Have a well-defined technical solution – producing LNG offshore is still a sector to find a unified approach. As a result, it is important to assess your technical solution critically to ensure that you are targeting the correct production range and you are applying the right solutions. A common mistake is to apply “proven” onshore technologies which are unsuitable for application in FLNG. By its’ nature FLNG will require a different approach and detailed engineering evaluation to select the right solution, which may not have a track record in onshore LNG. If the overall technical solution cannot be robustly defended then few will take a risk to fund such a project.
3. Finance – no project will achieve FID without the capital to fund it. For most FLNG projects finance will be required to be raised from international markets rather than from a company’s balance sheet. To unlock such financing it will be necessary to prove the following (at least);
It has been in the past that finance has been the elusive missing piece. Thankfully, financiers are becoming more comfortable with FLNG due to those projects that are under construction progressing towards first LNG. Minimising risk and uncertainty are the key to gaining the necessary finance.
Without having all of the above in place, it will be very difficult or impossible for an FLNG project to proceed to FID. However, even with all of the above in place there is no guarantee for success. A stable world economy, predictable LNG and gas prices as well as a good amount of luck would also make a big difference for the chances of any FLNG project looking to move ahead.
Tips for a successful FLNG project - Has Tom missed out any of this list? Let us know your thoughts below.
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