Page 12: of Maritime Reporter Magazine (February 2014)

12 Maritime Reporter & Engineering News • FEBRUARY 2014

OFFSHORE UPDATE

FLNG Market

Signifi cant Growth in FLNG Market as Export Projects Gain

Traction; Natural Gas to Lead Energy Demand

T here are many different views on the future of energy sup- plies, but strong agreement in two areas; over the next 25 years or so population growth and

GDP growth in the developing econo- mies, particularly China and India, will drive global energy demand to increase by some 50% and second; while oil’s share of the energy mix will decline, the largest growth will be in consumption of natural gas. Why? Natural gas is an outstanding fuel for power generation, gas-fi red power plant has the lowest

Capex, it produces less than half of the

CO2 emissions of coal, it is relatively cheap and there are abundant reserves – the International Energy Agency (IEA) suggests suffi cient to last 230 years at current consumption levels.

In Asia it’s not just China and India that are propelling growth; the South- east Asian nations are also contributing to the dynamic shift. Currently, the re- gion’s per-capita energy consumption is suppressed due to the lack of access to electricity. However, as this is ad- dressed, demand is expected to increase by more than 80% by 2040.

Oil, however, is a different subject. It is maintaining a high price and shows signs of an approaching peak in con- ventional supplies. Some would say that conventional supplies have peaked – between 2003 and 2010 it seems that the world’s top-eight international oil companies all saw a peak in production.

Furthermore, between 2000 and 2012 the net growth in global oil supplies came from unconventionals, such as the

United States (US) shale and Canadian oil sands, neither of which rate as cheap oil. Any restrictions in oil supplies will also serve to increase the demand for natural gas.

Importance of LNG

Most natural gas is used in the re- gion of production, resulting in major pipeline networks in Europe and the

US. However, many of the largest re- serves are often great distances from markets and unlike oil, gas is expensive to transport as pipelines start to become economically unviable much beyond 1,000 km. In this situation liquefaction offers an alternative. By cooling the gas to -162 Celsius the gas liquefi es and re- duces to one six hundredth of its vol- ume, allowing transportation in large insulated tanks on specially designed gas carrier ships.

Liquefaction requires specially built, high-cost complex plants, often con- taining several parallel process ‘trains,’ accordingly LNG plants are expensive.

However, the cost of alternative energy sources is increasingly making LNG an option in many markets, Japan being a leading example, where prices are in the order of $16, compared with $9 in

Europe and $4 in the US.

Some 30% of global natural gas im- ports are already being delivered via

LNG. Supply growth in recent years has been from LNG plants in Africa, the Middle East countries of Qatar and

Yemen. Considerable investment is be- ing made in additional plants and in 2014-15 Australia should greatly add to supplies. Potential future sources of supply also include Canada, Russia,

East Africa, the Eastern Mediterranean and indeed US shale gas, when politi- cal objections to natural gas exports are overcome. According to the Douglas-

Westwood’s ‘World LNG Market Fore- cast’ over the period 2013 to 2017 $143 billion (bn) will be spent on liquefac- tion plants, $35bn on LNG carriers and $50bn on import facilities. The total is double that of the previous fi ve-year pe- riod.

FLNG

However, large reserves of natural gas lie stranded offshore, beyond the eco- nomic reach of pipelines. In order to address this opportunity, fl oating LNG (FLNG) vessels have been designed with the fi rst ones now under construc- tion. A fl oating offshore LNG vessel eliminates the need for costly produc- tion platforms and long subsea pipe- lines to the shore. There are also other advantages; FLNG has attractions in providing more secure operations than onshore plants in regions with unrest such as West Africa. It also offers a so- lution for unwanted associated gas from oil production, which has traditionally been re-injected into fi elds or burnt off, resulting in environmental damage. In addition, FLNG reduces the need to construct onshore facilities in environ- mentally sensitive areas.

In some situations an FLNG vessel built in a specialist shipyard can offer a lower-cost solution than a one-off ‘stick built’ plant onshore. However, an FLNG vessel is still a high cost item with signifi cant technical challenges.

Build of the world’s fi rst FLNG ves- sel, to be used on Shell’s Prelude, is now underway. The vessel will be the largest ever made, at 488 metres (m) long and 74m wide, and will displace more water than six aircraft carriers. It will be moored at location for 25 years with expected production capacity of 3.6 million tonnes of LNG per year. It will be part of the pioneering batch of

FLNG vessels and its success is key to the future of FLNG projects. Shell awarded the design, construction and installation to the Technip-Samsung

Consortium in 2011.

Spending Shift from Middle East to

Australasia

The success of the Prelude FLNG ves- sel is not just critical for future projects; it is also pivotal to Australia’s future domination of LNG exports as its geo- graphical location has export advan- tages given its close proximity to the markets of Southeast Asia.

According to the IEA, more than two- thirds of current global investment in

LNG is in Australia, where there are al- ready three LNG export projects operat- ing and a further seven under construc- tion. Currently, the largest producer of LNG is Qatar, which experienced a massive 63 bcm expansion in capacity since early 2009 to reach 105 bcm in 2013.

As of late 2013, Qatar represents ap- proximately 25% of global LNG liq- uefaction capacity. Other signifi cant exporters include Indonesia, Malaysia and Algeria. Russia, Yemen, Peru and

Angola have joined the LNG export business in recent years. With the in- clusion of LNG exporting activities by

Papua New Guinea in 2014, Australasia is poised to become the second largest

LNG exporter behind Qatar by 2016.

Australia’s trajectory towards be- coming a leading LNG exporter is not without its challenges. The strong Aus- tralian dollar, high taxes, labour short- ages and regulatory red-tape will work against the proposed LNG projects not yet in production. Its LNG exporter po- sition is also threatened by competition

AMANDA TAY

The market for the construction of

FLNG vessels is expected to increase from $3.7B in the period 2007-2013 to $64.4B during 2014-2020

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