Petronas sanctions 2nd FLNG project and awards EPCIC

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Petronas has awarded the engineering procurement, construction, installation and commissioning (EPCIC) contract for its second floating LNG (FLNG) project. The contract went to a consortium of Japan’s JGC Corporation and South Korea’s Samsung Heavy Industries, following a final investment decision (FID) on the project by the Petronas Board on the 23rd January.

News that FID had been taken emerged towards the end of January during a financial results presentation by the company that will be supplying gas for the project, Murphy Oil. CEO Roger Jenkins confirmed that the project "is now fully sanctioned by both parties and the oil-linked gas terms agreed”. He described the FID as “a major milestone for both companies”.

The 1.5 mtpa project – Petronas FLNG 2 (PFLNG 2) – will be the second Petronas FLNG project to reach FID. The first, PFLNG 1, has been under construction since June last year at the Daewoo Shipbuilding & Marine Engineering (DSME) shipyard at Okpo, on South Korea’s Geoje Island. It recently reached a significant milestone with the start of the laying of its keel.

“First gas in 2018”
Gas for PFLNG 2 will come from fields in Block H offshore Sabah, which is operated by Murphy Oil. The project will be a phased development, centred around the Rotan field and three satellite fields: Alum, Bemban and Buluh. Jenkins said: "We are planning on first gas in 2018 with a 10-year peak gas rate near 207 MMcf/d gross or 150 MMcf/d net."

Petronas awarded two contracts for front-end engineering and design (FEED) in September 2012, with the intention of awarding the EPCIC contract to one of the two consortia once FEED work had been completed.

One FEED contract went to a consortium of JGC Corporation and Samsung Heavy Industries (SHI), with SHI responsible for the engineering of the hull and JGC responsible for the engineering of the topsides and the liquefaction facilities.

The second FEED contract went to the so-called MITC Consortium, comprising Mitsui Ocean Development & Engineering Company (MODEC), IHI Corporation and Toyo Engineering Corporation, all based in Japan, and CB&I Nederland, a subsidiary of US-based CB&I. MITC said its contract included designing the liquefaction system, the hull, living quarters, a mooring system, the LNG storage tank and an LNG offloading system.

MITC added that the FEED and a cost estimate for the EPCIC contract were expected to be completed by the middle of 2013, while JGC said its target date for completion was “the second half of 2013” and that LNG production was due to begin in 2016. It appears therefore that an element of delay has crept into the project.

The award of the contact to JGC and SHI is a coup for both companies in what has become a fast-growing sector of the LNG industry. The Malaysian subsidiaries of both companies will be participating in the work.

A growing list of credible contenders
FLNG may have been a long time coming, but since Shell announced FID on Prelude in May 2011 developments have accelerated rapidly. There are now three projects under construction – Prelude, PFLNG 1, and the Exmar project for Pacific Rubiales in Colombia – and several more are hoping to reach FID before the end of 2014. Several more projects are in the planning stages.

As things currently stand, the first FLNG project to begin operations is likely to be the Pacific Rubiales project, the vessel for which is being constructed in a Chinese shipyard. It was initially due to come on stream this year but looks likely to be delayed into 2015.

As for PFLNG 1, Petronas recently commented that it is on track to be completed in the fourth quarter of next year. Although it reached FID later than Prelude, it is a smaller project with a capacity of 1.2 mtpa. Petronas awarded the EPCIC contract to a consortium of Technip and Daewoo at the World Gas Conference in Kuala Lumpur in mid-2012.

At the start of December Shell announced that the hull of its Prelude FLNG facility had been floated out of its dry dock at the SHI shipyard located on South Korea’s Geoje Island. Operation is expected to begin in around 2017.

Excelerate’s 4.4 mtpa Lavaca Bay project in the United States completed FEED in May last year and a formal application for approval to site, construct and operate the plant has just been submitted to the Federal Energy Regulatory Commission (FERC). That approval is likely to take at least a year, making the likely FID date sometime in the first half of next year. The project is also awaiting a licence for exports to non-Free Trade Agreement (non-FTA) countries.