FLNG: Looking to the future

Susan L. Sakmar's picture
Susan L. Sakmar, Independent consultant, author and adjunct law professor, University of Houston Law Center
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As of September 2016, four FLNG projects are under development, including Shell’s Prelude FLNG.   Just a few years ago, the energy world was eagerly watching the Prelude project – a massive floating liquefaction facility designed to process and liquefy natural gas directly from the Prelude field located off the coast of Western Australia.   Shell took FID on the estimated $12.5B Prelude project in May 2011 and it quickly became one of the most closely watched LNG projects in the world.   Since taking FID, Shell has welcomed three joint venture partners to the project – INPEX (17.5%), KOGAS (10%) and CPC Corporation (5%).

Back in 2011, it was thought that if Shell could prove out the concept of FLNG, it could open the door for many more FLNG projects around the world in areas where natural gas reserves have been stranded due to the lack of appropriate onshore plant sites.   FLNG is expected to result in lower operational costs and a reduced environmental footprint since there is no need to construct expensive pipelines to shore and no compression platforms to push the natural gas to shore.

When constructed, the Prelude FLNG facility will be the world’s largest floating production facility in the world, measuring 1,062 ft (488m) long by 243 ft (74 m) wide, which is longer than four soccer fields and comparable in size to many of the world’s most iconic structures.  For example, if stood up, Prelude would be taller than the Eiffel Tower in Paris and the Petronas Towers in Kuala Lumpur!

Image:  Shell International Limited, Susan L. Sakmar, “Energy for the 21st Century: Opportunities and Challenges for LNG.”

In November 2013, Shell celebrated the launch of the Prelude FLNG hull, the biggest hull ever built and weighing approximately 200,000 tonnes.   Once operational sometime in 2017 or 2018, the Prelude FLNG facility will produce at least 5.3 mtpa of liquids: 3.6 mtpa of LNG, 1.3 mtpa of condensate and 0.4 mtpa of liquefied petroleum gas (LPG).

While all eyes were on Prelude, which was expected to be the world’s first FLNG to come online, Petronas was working on its first FLNG project to unlock the gas reserves from Malaysia's remote and stranded fields.   Officially named on March 4, 2016, the PFLNG SATU project will have a production capacity of 1.2 MTPA and will be moored at Malaysia’s Kanowit gas field, 180 kilometres offshore Sarawak.   PFLNG SATU is expected to come online in 2016, beating out Prelude as the world’s first FLNG project.

Petronas has a second FLNG project underway (PFLNG2) that will undertake the liquefaction, production and offloading processing of natural gas in the Rotan field, 240km offshore Sabah.   Although the hull of PFLNG2 was launched earlier this year, the project’s timeframe has been pushed back to 2020 from 2018.

The fourth FLNG project under development is the Eni proposed Coral FLNG project offshore Mozambique, which we featured in Gastech News in January 2016 as a project to watch for in 2016.  In February 2016, the Mozambique government approved Coral FLNG’s plan of development for the first phase for 5 trillion cubic feet of gas in the Coral discovery, located in the Area 4 permit.

Eni was hoping to take FID on Coral FLNG sometime in 2016, but has been more focused of late on a deal to sell a multi-billion dollar stake in its planned Mozambique LNG project to ExxonMobil.  Sources have reported that the Coral field will remain outside the scope of the deal with Exxon, with Eni reportedly earmarking LNG from the Phase I development of Coral to BP.

When first envisioned years ago, the four FLNG projects under development were viewed as potential game changers in the LNG business and a way to unlock gas reserves from remote, marginal and stranded gas fields in a faster, cheaper, and more flexible manner than building an onshore liquefaction facility. FLNG also has the advantage of avoiding some of the lengthy permitting and regulatory approvals necessary to construct onshore facilities.

Does FLNG still make sense in today’s low oil and gas price environment with a flood of new supply coming on the market from Australia and the United States? Beyond the four FLNG projects under construction, the IGU reports that as of January 2016, another twenty-four FLNG proposals totalling 171 MTPA have been announced in numerous countries including Australia, Canada, Equatorial Guinea, Indonesia, Mozambique, Papua New Guinea, the Philippines, and the United States.

Thus, it seems the concept of FLNG still attracts worldwide interest with many projects waiting in the wings as the concept proves out.  The four projects under construction will help identify the actual costs of FLNG, which will help determine the future evolution of the FLNG industry.

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Featured image: Flickr