Voices OE February

OE Staff

February 1, 2014

Waves of progress. With several mega projects underway, OE asked: Can floating LNG be done economically on a smaller scale?

The obvious answer is that we believe so, but it depends on the application. Wison Offshore & Marine sees smallerscale, barge-based FLNG as a niche that addresses the unique market needs to export and monetize surplus gas produced from onshore shale sources, as well as offshore stranded gas assets. These cost-effective LNG generation solutions are analogous to the use of power barges deployed to meet the electricity needs of emerging countries. The barge-based FLNG facility is not going to compete with premier projects like Shell’s Prelude development, but they do offer quick to market, relocatable resources to monetize second and even third-tier opportunities, or, in some cases, may serve as a temporary or “early production” unit until the larger and more costly permanent unit is developed - either floating or onshore. Additionally, by using our “Plug & Play” approach, we offer a much more cost-effective solution that may be brought in quickly or expanded in phases as near-shore developments grow.

L. Dwayne Breaux, President, Wison Offshore & Marine Ltd.

Yes, there will be a niche market for floating, small-scale LNG in the future. It will be especially relevant for small, dry gas reservoirs with little impurities, for associated gas, and for liquefaction of pipeline gas. In short, these are projects where a relatively simple topside is feasible, and for many such projects floating LNG will be the only economically viable option.

Lars Petter Bilkom, DNV GL LNG Segment Director

The market circumstances,the environmentalcircumstances, and thetechnical maturity meanthat FLNG has now grownto become a very seriousgas monetization option in a widening portfolio of opportunities. Shell’s current FLNG technology allows for the development of smaller fields through tiebacks and the ability to move the facility to a new opportunity at the end of field life. The development of a small FLNG facility for an individual field is being studied by our industry but is expected to be more challenging based on a combination of technological and economic factors.

Marjan van Loon, VP LNG, Shell Upstream Development

Small scale FLNG is not only feasible, down-scaling has already started. Smaller FLNG means faster lead times, greater shipyard flexibility, easier financing, and rapid return on investment. Thanks to shale gas, we’re also seeing small-scale coastal FLNG being considered as an economical alternative to large onshore terminals. We’ve worked on a variety of FLNG R&D and planning projects, and think that for environmental and economic reasons there is a great potential for these systems in the future.

Hayato Suga, General Manager, Natural Resources and Energy Department, Class NK

Yes, but we need to continue to drive down the cost of FLNG vessels. One way to achieve this is by leveraging our experience from FPSO tanker conversions, and generating a new range of FLNG solutions from converted LNG tankers. SBM Offshore’s “Twin Hull” FLNG concept is a good example of what can be achieved by innovative thinking in this area, being more economical than the equivalent newbuild FLNG.

Mike Wyllie, Group Technology Director, SBM Offshore

Yes, and as a matter of fact EXMAR is currently constructing what will be the world’s first floating LNG liquefaction unit under a “Build-Own-Operate” contract for its client Pacific Rubiales Energy (PRE). This floating liquefaction unit will have a LNG production capacity of 0.5 MTPA and will come online offshore Colombia in Q2 2015. The LNG produced is meant to be sold by PRE to Gazprom Marketing & Trade under a five-year, FOB Sale & Purchase agreement. This project proves that small-scale floating LNG is a quick-to-market and cost-effective alternative, combining available small-scale LNG liquefaction technology with marine construction and operations experience.

Miguel de Potter, Chief Financial Officer, EXMAR