SUGAR LAND, Texas—Decreasing workloads caused by falling commodity prices have left fabrication yards hungry for business, but the floating LNG (FLNG) market could satisfy their appetite.

Consultants for Quest Offshore said FLNG demand appears to be a silver lining in the offshore fabrication market. The Houston-area strategic advisory and consulting firm forecasts a decline in tonnage through 2016 for Korean yards, essentially being cut in half from highs around 740,000 tonnes in 2014. An uptick is anticipated in 2017-2019, according to the firm.

But the FLNG market could change the outlook for the better, although Quest still thinks the FPSO sector will remain the backbone of demand globally, said Caitlin Tarver, senior director of Quest Offshore’s market research and data division.

“We haven’t seen a lot of [FLNG units] historically, but now we’re seeing them for all sizes of gas fields and being used as nonproduction units, more as offshore LNG plants,” Tarver said July 22 during an event at the firm’s office in Sugar Land. She pointed out that there are not many of these units, but their price tags could “definitely create a more meaningful and powerful impact on that forecast for shipyards and spending.”

Quest called the outlook for nine FLNG orders through 2019 “positive” despite the figure being 25% lower than the previous forecast due to today’s market conditions. U.S. crude for September dropped below $50/bbl (WTI) for the first time since April. The price was more than double that last summer.

Oil-linked LNG prices in Asia aren’t faring much better. The Japan LNG import price was $9.50/MMBtu for June 2015, compared with $16.13/MMBtu for June 2014.

But the FLNG market is still moving award.

Quest’s managing consulting and project director, Sean Shafer, pointed out recent contract awards as evidence. These include four hulls being awarded for the Browse project offshore Australia, which is still in the FEED phase, and a contract awarded by Golar LNG Ltd. to the Keppel Shipyard to convert an LNG carrier to a floating liquefaction facility.

“It’s kind of surprising because oil prices and oil-linked LNG prices in Asia are low, but operators are still progressing with FLNG,” Shafer told Hart Energy. “It really is the silver lining.”

The latest Golar contract was announced July 21. As part of the agreement, the 126,000-cubic-meter LNG carrier Gandria will be converted. The contract follows the Hilli and Gili conversion contracts.

“In the current low oil and gas price environment the use of the [Golar LNG] concept to develop stranded and associated gas on a fast-track basis has gained momentum as a solution with potential to provide early and robust returns for resource developers and host governments,” Golar LNG Ltd. said in a news release.” The GoFLNG business model with a fixed tariff structure reduces the project execution and capex risks for the resource holder and provides a flexible alternative when compared to development of more conventional long lead-time, capital intensive, land-based LNG facilities.”

Currently, there are six FLNG units under construction, Shafer said. Petronas started building an FLNG unit in June 2013. The company said once the unit, which will produce about 1.2 million tonnes of LNG per year, is complete it will be the world's first to be in operation. Shell is also building an FLNG unit, which has a liquids production capacity of at least 5.3 million tonnes per annum, in Australia’s Browse Basin.

After 25 years of being talked about, FLNG is now an accepted new technology, Shafer said.

Although costs are high relative to offshore equipment in general, the industry has a better handle on controlling those costs for FLNG units, especially when compared to onshore LNG plants, he added.

Velda Addison can be reached at vaddison@hartenergy.com or via Twitter @veldaaddison.

Offshore