One of the world’s first floating production, storage and offloading (FPSO) LNG projects has reached a significant milestone with the start of the laying of its keel. The Petronas Floating LNG facility (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. The start of the laying of the keel – the basic structure around which the hull of the vessel will be built – puts PFLNG 1 in the running to become the world’s first FLNG facility to enter production.
The first block of the keel was laid on 6th January in the presence of the integrated project team led by Petronas and including partners DSME and French engineering contractor Technip. Petronas commented that the project was on track to be completed in the fourth quarter of next year, “making it the world’s first to be in operation”.
However, it may yet be pipped at the post by a much smaller project being constructed in a Chinese shipyard for deployment in Colombia. Belgian shipping company Exmar announced in March 2012 that it had signed an agreement to provide a Floating Liquefaction, Regasification & Storage Unit (FLRSU) – which it will own and operate on a tolling basis – for a subsidiary of Canada-based Pacific Rubiales Energy. It was initially due to come on stream this year but looks likely to be delayed into 2015.
A sea change for FLNG: Decades in the making, the concept of floating liquefaction of natural gas is fast becoming reality. All three of the FLNG projects currently under construction have recently celebrated construction milestones. 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 Samsung Heavy Industries (SHI) shipyard, also located on Geoje Island. Meanwhile, the Pacific Rubiales project, under construction at a shipyard at Nantong in China, owned by Shanghai-based Wison Offshore & Marine, saw the start of the laying of its keel in July 2013.
Until relatively recently, floating liquefaction was regarded primarily as a technology for the monetisation of remote stranded gas fields. The industry view was that FLNG would open up opportunities to bring offshore gas resources to market that were uneconomic because they were too costly to develop using conventional technologies.
Removing the need for offshore production platforms and long pipelines to shore would improve project economics. Putting liquefaction facilities a long way offshore would reduce the environmental impact in sensitive locations. And when fields had been depleted, the facilities could in principle be re-located to other fields, with only subsea production facilities needing to be installed.
Prelude and PFLNG 1 were designed to do just that. PFLNG 1 will be initially deployed 180 kilometres offshore Sarawak at Malaysia’s Kanowit field, while Prelude will be moored some 200 kilometres offshore Australia. Both projects will be enormous, with Prelude being the world’s largest floating structure. Its gigantic scale means that while its construction began well before the other two projects it is not expected to come on stream until late 2016 or, more likely, 2017.
Measuring nearly half a kilometre in length and weighing over 200,000 tonnes, Prelude’s enormous hull was floated out of its dry dock in December. (Source: Shell)
But attitudes towards FLNG have changed radically over the past couple of years. FLNG is increasingly seen as a way of tackling arguably the biggest challenge the LNG industry faces: the ballooning cost of onshore liquefaction development, notably in Australia, where capital expenditure is now an order of magnitude greater than for the projects that were being conceived and sanctioned a decade or so ago.
A “competitive proposition”: According to Barend Pek of Shell Global Solutions: “In the first instance, Shell considered FLNG as a technology for developing smaller gas-condensate fields (3-5 Tcf) at a relatively large distance from shore (200 km or more) which could otherwise not be developed economically.
“Economic feasibility studies since Prelude FID hint, however, at a much wider application area . . . Besides applications that are similar to Prelude or a development where multiple smaller fields are exploited by means of sub-sea tie-backs, internal economic analyses show that multiple FLNG facilities operating on a large field may be a competitive proposition versus an onshore LNG plant.”
It is a message that has been echoed by other companies working on FLNG projects. They include Excelerate Energy, which is planning a near-shore project in the United States, and Pangea LNG, a company headed by former Excelerate CEO Kathleen Eisbrenner, which is pursuing FLNG projects offshore Israel and near-shore in the United States.
Leveraging the might of the world’s great shipyards: Excelerate’s CEO, Rob Bryngelson, believes that floating liquefaction has a much brighter future ahead of it than many in the industry realise: “If you want to build an LNG project in a remote location, you have to go in and spend half a billion dollars to build a town and infrastructure and roads and an airport to get people in and out. And that’s just the beginning. You’ve also got to fly everybody in to build tanks and to put the whole plant together.
“We do all that in a shipyard. The workers are there. All the equipment is there. And all you’re building on site is pretty basic infrastructure.”
We are also seeing the emergence of clear leaders as technology, equipment and engineering companies jostle for position in what looks likely to become a large and lucrative business. At the forefront are the South Korean shipyards for the hulls, Air Products and Black & Veatch for the liquefaction processes and equipment, and Technip, involved in both Prelude and PFLNG 1, for the engineering of the topsides.
Petronas hopes to reach FID on a second FLNG project in coming months.
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