Canadian LNG: Optimizing cost control through pre-FEED design

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Theodore Michael, LNG Analyst, Genscape
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At the 2016 Canada LNG Export Conference in Vancouver last week, participants discussed how Canadian LNG projects can move forward in a complex environment.

Here are some of the conference highlights by Theodore Michael, LNG Analyst at Genscape.

Haste Makes Waste, Begin with the Ends in Mind: A boy scout is always prepared. Especially when tackling LNG projects in such a complex ecosystem as Canada’s. Given FID to production may take 5 years and a facility operating life may exceed 40. A few years spent in front end development can make an enormous difference to cost outcomes. Especially when pre-Feed analysis can spot an immitigable flaw. One that can haunt a project for years and cost billions in overruns.

LNG is so capital intensive that engineering innovations, especially within such a well-known process, tend to be relatively conservative. Hence, there is little room for cost saving on the engineering side.

LNG Site Selection Biggest Cost Driver: Thus, engineering and local labour content requirements leave site selection and development as the biggest drivers of cost reduction. Extensive pre-Feed on both the physical and social engineering end are essential to controlling cost overruns. A shortcoming to which remote greenfields are particularly vulnerable (Australia etc.). Hubris born of excess optimism lead many to rush the job. Canadian projects must be especially cautious given the complexities of the political situation as well the challenges of moving gas across the Rocky Mountains, 500 kilometres or more to the Pacific Ocean. Co-opting the locals into a sustainable relation with the project is the base of all pre-Feed work.

Access to water gives the BC LNG projects a specific advantage over landlocked mega projects. Water means larger modules can be shipped to the site prior to construction. Lowering costs relative to Tar Sands in Alberta. Now at the bottom of the EPC cycle, the Canadian waterborne projects have a second advantage. BC can pull labour from the declining construction in Alberta. Integrating this experienced labor pool with state of the art workflow and vendor tracking systems will be essential to tackle what nature has made. A formidable geographic barrier, the Rocky Mountains stand in the way of gas resources that could fuel Asia for a century.

Canadian project developers must weigh the merits of regional and global projects. The ideal project has no flaws in regulatory and project permitting. An uncontested pipeline route for feedgas. A socially acceptable shipping point into and out of the project. Any flaw must be subject to reasonable mitigation i.e. where the developer can control the process. When a 3rd party controls the remedy, a project flaw may be immitigable.

The Canada LNG Conference & Exhibition is where the global LNG community meets to discuss and develop the future of Canada’s LNG industry.

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Image Source: Bechtel 

The views expressed are the author’s own, and do not reflect any position on behalf of dmg:: events Global Energy.