FLNG – becoming a buoyant business

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By Alex Forbes

With four projects now in the construction phase and a growing list of possible future projects, Floating LNG (FLNG) is rapidly gaining acceptance from the sponsors of new gas projects. At the same time, we are starting to see notable trends in the selection of shipyards, equipment suppliers and engineering contractors.

The big Korean shipyards are clearly front-runners for the hulls. As for engineering contractors, Technip is currently in pole position having been selected for the engineering, procurement and construction contracts for the Shell-led Prelude project and the first of the two Petronas projects to have reached final investment decision (FID).

Technip is also well positioned for future Shell projects, having signed a global master agreement with Shell and Samsung Heavy Industries in 2009 “to design and build multiple FLNG facilities”.

Technip’s CEO, Thierry Pilenko, is confident the company has established a significant competitive advantage in what looks like becoming a fast-growing industry.

“We are the only engineering company that can say ‘we are doing FLNG today successfully with two major customers’. Technip is the only engineering company that can bring together all the expertise necessary for the integration of liquefaction, the separation of liquids and so forth, the floater and the subsea. That’s a key differentiator and not something that is easy to imitate.”

Sea change Pilenko agrees that there has been a sea change in attitudes towards FLNG over the past two years, not just as a way of monetising gas a long way offshore but also as a way of controlling risks in projects located in remote regions with little existing onshore infrastructure.

“Because two real projects have made progress – Prelude for Australia and the Petronas project for Malaysia – there is confidence that FLNG is actually feasible,” says Pilenko, “and that there are people, whether they are engineering contractors or fabricators, that can make this happen.”

A key factor in the growing popularity of FLNG has been the realisation that several of the Australian onshore liquefaction projects currently under construction are facing major cost and schedule over-runs – because they are being constructed “in an environment where things are less controlled than in a yard”.

“FLNG is now considered as an alternative,” , says Pilenko, “not only from the cost standpoint, but also from the schedule standpoint – because the schedule is as important as the cost.”

Project economics Pilenko declines to be specific about the economics of the projects Technip is working on because the industry is still in an early stage of development and because FLNG economics are very dependent on the hydrocarbon composition of particular gas fields. “For example,” he says, “if you produce more liquids obviously the economics of a project are better.” What he is prepared to say, however, is that “in an environment with a high cost of construction, like onshore Australia, FLNG is competitive”.

For now the technology has yet to be proven by an operational project. So are there any aspects of the technology that have yet to be worked out, such as the offloading equipment needed to transfer LNG from the floater to LNG carriers?

Pilenko says there has been much discussion and detailed analysis of the various aspects of FLNG technology. “Offloading was one of the challenges, but there are proven solutions that are going to be implemented in the first units.”

Robustness, he adds, was one of the key criteria for Prelude. “Technip has been developing the concepts and the technologies that need to be integrated on those units for about ten years. This is why Shell came to Technip first – because we have the ability to integrate the topside, the liquefaction process, and the subsea. It was one shop where the client had all the expertise required – plus almost ten years of research and development on FLNG. That’s why we found good common ground with companies like Shell and Petronas.”

Pilenko also sees FLNG as “a key enabler” . “For certain operators the ability to propose FLNG as a solution is a differentiator that can give them access to resources. So whoever masters this has a competitive advantage.”

After more than a decade of development it is clear that FLNG is fast becoming reality. What will be interesting to see, as more projects enter the construction phase, is just how popular the technology becomes as an alternative to onshore liquefaction.