In addition to the five units mentioned above, one more is in construction (Coral), one in pre-engineering (Tortue), and one at an advanced stage of negotiation (Delfin). It has just been announced that the preliminary engineering for the Tortue project has been awarded to KBR, and Golar LNG has been chosen to provide the FLNG vessel, which will be based on a converted tanker, Gimi, similar to the Cameroon vessel. The Coral FLNG is currently under construction in Korea and is due for delivery in 2022.

This rate of progress appears slow. But the LNG industry is by tradition relatively cautious, and the application of new technology has to be carefully assessed to ensure that it will deliver both technically and commercially. A recent review by the author of industry attitudes to FLNG risk found a range from cautious optimism to rejection. This is quite different from the attitude expressed about the ‘sister’ technology of floating storage and regasification units, which is regarded as well proven and acceptable although still relatively new (the first unit started up only 25 years ago). But liquefaction is a far more complex process. 

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FLNG vessel locations and status

Aggregate number of FLNG vessels by start-up year

This article explores key factors that are likely to affect the scope of FLNG’s role in LNG production.

Physical capacity limitations

Placing a liquefaction plant on an LNG tanker limits the plant’s size and production capacity. The Prelude vessel is the largest offshore floating structure in the world at 488 metres long and 74 metres wide and displaces 600,000 tons—five times that of a world-class aircraft carrier! Yet it only produces 3.6 million tonnes per annum (mtpa)—just less than an industry-standard onshore train of 4 mtpa. Golar LNG’s vessels are based on converted Moss-type tankers with the liquefaction facilities placed on sponsons, giving overall dimensions of approximately 300 metres long and 60 metres wide—still physically very large—and producing 2.4 mtpa. Compare this to the recent Sabine Pass onshore plant, which has 6 trains producing some 27 mtpa. To match this production would require 7 Preludes or 11 Golar vessels.

On-stream time

A major weakness of FLNG is the unpredictable availability of the offloading system due to the dependence on sea conditions of both the berthing of the offtake tanker and the connection of loading arms. This is of particular concern in open-ocean conditions and less so at inshore locations, for example Cameroon. The preliminary arrangements for the Tortue development appear to include an extensive offshore breakwater which is apparently intended to address this issue.

Weather-related delays in offloading could limit FLNG’s potential to become a world-scale source of LNG and position it as better aligned to a spot market or niche supply role. However, this risk could be mitigated by operators if they were able to offer a backup supply to meet the contracted production.

Attitude to risk

As mentioned earlier, the industry is still generally very cautious about the risk of this new technology. The general view has been that ‘we may do it if we have to, but we would rather invest in an onshore project.’ This attitude is likely to change as confidence builds with more FLNG units coming on stream, but will limit current expansion, particularly if a developer has onshore or nearshore gas fields available for development. Shell often referred to the Prelude as a technology development project intended to identify challenges and test solutions to them. On the other hand, the approach by Golar LNG seems to be quite different, in that it is offering a commercial solution based on proven components and risk aversion does not appear to be significant. Having said that, it should be noted their current projects are in less challenging environments—Cameroon inshore and Tortue inside a breakwater. So this is not a true like-with-like comparison. 

Offshore gas reserves

A significant factor in determining if FLNG will be niche or world-scale will be the number and size of future offshore gas fields available for development compared to those onshore. Recent finds in East Africa indicate there is a lot of gas offshore Mozambique and Tanzania; but the main developers, ExxonMobil and Anadarko, favour an onshore solution. However, Eni have favoured a first-phase FLNG solution, which is currently under construction (Coral FLNG). A recent report stated that

80 per cent of the world’s gas reserves were located in 10 countries, with Iran, Qatar, and Russia by far the largest. These locations are predominately onshore or nearshore, and thus likely to be processed by onshore plants. For major LNG production, the offshore fields need to be remote, and these appear to be less prevalent than onshore or nearshore fields. This suggests that FLNG is likely to remain more of a niche source. 

Costs

It is too early to get an accurate view of FLNG costs. The current capital cost estimate ranges widely, from $3,000/tpa (tonne per annum) capacity for Prelude to $600/tpa for Golar LNG. But the price of the unit is only part of the cost. For example, at Tortue, considerable additional capital cost will be added by the construction of an offshore breakwater and related infrastructure.

The most significant cost disadvantage of FLNG is the cost of operations, which is significantly higher offshore due to the remoteness and the need to transport personnel and equipment by helicopter or supply boat and possibly even mobilize floating cranes or hotels. Offshore operations are inherently more expensive than onshore, particularly if the onshore plant is located in an established industrial area. 

Marginal fields enabling technology

Drawing a parallel with early offshore oil production’s use of floating production storage and offloading (FPSO) vessels, FLNG can be regarded as a technology that makes it possible to estimate the longer-term performance of a particular reservoir before making a final investment decision on the major production scheme. This argument would tend to favour FLNG being considered more as a marginal field enabling tool than for longer-term world-scale LNG production. FLNG’s flexibility as a reusable asset lends itself to this application.

Reusable asset

One of the major advantages of FLNG has been argued to be the ability to relocate a plant to a new field (originally envisaged as an end-of-field-life solution). This has already been demonstrated twice, with the Caribbean FLNG (Tango) unit relocated from Columbia to Argentina and Petronas Satu relocated from Sarawak to Sabah. Had these facilities been developed as onshore plants, they would have been expensive sunk costs. In hindsight it is interesting to note that had the Egyptian liquefaction plants at Idku and Damietta been developed as floating units, they could have been relocated during the six-year period during which no gas was available. A recent article stated the compensation for nonproduction at Damietta was around $2 billion. Thankfully gas supplies have now become available.