Within the last year, interest in floating liquefied natural gas (FLNG) facilities has grown substantially, a trend that analysts at Douglas-Westwood Ltd. (DWL) believe is likely to continue over the next seven years.

According to the company’s “World FLNG Market Report,” Australasia and Africa will remain the focus of FLNG liquefaction projects, largely due to the number of stranded gas fields in these regions.

FLNG investment will grow considerably over the next seven years (Image courtesy of Douglas-Westwood Ltd.)

Meeting the growing need for gas

According to DWL, FLNG regasification projects are focused on countries where seasonal demand spikes are a concern because there is a need for fast-track projects to meet increased demand. FLNG liquefaction also has been seen as a potential solution to dealing with associated gas. Mid-size FLNG vessels — those with the capacity to produce 1 to 2 million metric tons per year (mmtpa) — are seen as a viable solution for capitalizing on smaller quantities of gas.

DWL expects $23 billion to be spent on FLNG facilities over the 2010 to 2016 period. Despite a large number of FLNG regasification projects on the books, the vast majority of this money will be spent on liquefaction terminals, as capex associated with a floating liquefaction terminal is more than triple that of a typical floating import terminal.

Australasia and Africa, due to their FLNG liquefaction projects, account for the biggest proportion of forecast capex, DWL reports. Interestingly, North America, despite having the largest number of import terminal prospects, is only expected to account for $1.6 billion or 7% of the total capex between 2010 and 2016.

Shell moves FLNG project forward

Shell is one of the companies that is investing in FLNG in Australasia. On Oct. 8, 2009, Shell announced plans to develop its Prelude and Concerto gas discoveries in the Browse Basin off the northwest coast of Western Australia using its innovative FLNG technology.

Shell’s FLNG solution allows in situ gas processing offshore using a facility that measures approximately 1,575 ft by 246 ft (480 m by 75 m) and can produce around 3.5 million metric tons of LNG per year along with condensate and liquid petroleum gas. Fully ballasted, the FLNG facility weighs approximately 600,000 metric tons.

One of the advantages of an FLNG facility is that it can be re-deployed to another gas field once production at one gas field is complete. Shell’s facility is standardized for a “design one, build many” approach, which allows repeatability gains to be captured during design and construction phases. The facility is suitable for offshore fields that are extremely distant from shore and can remain on station during harsh metocean conditions, including cyclones or hurricanes.

The Prelude FLNG project is in the front-end engineering and design (FEED) phase of development. FEED for Prelude is being undertaken as part of Shell’s contract with the Technip-Samsung Heavy Industries consortium for the design, construction, and installation of multiple FLNG facilities.

The development is expected to see 20-plus years of operation, according to Shell, and will contribute to Australia’s economy through employment, tax revenue, and business opportunities for Australians.

FLNG for Nigeria, Brazil

In November 2008, Sevan Marine subsidiary Kanfa Aragon awarded Dresser-Rand a letter of authorization to supply the compression equipment for the world’s first FLNG facility LNGP1, which is slated to work offshore Nigeria.

The FLNG unit is designed to have a liquefaction capacity of approximately 1.7 mmtpa. Samsung Heavy Industries (SHI) is the EPCIC contractor for LNGP1, while Kanfa Aragon is the engineering and procurement contractor for the topsides facilities.

In an announcement issued by Dresser-Rand, Vince Volpe, president and CEO, explained the company’s interest in pursuing floating LNG. “Over the past three years, we have identified LNG liquefaction as a strategic growth opportunity for the coming 5- to 10-year period,” he said. “While many of the land-based projects continue to experience delays in permitting and partner funding, it now appears that the offshore floating projects present a real and present opportunity.”

Floating liquefaction units provide an economic means to develop stranded gas reserves to help meet the world’s growing demand for natural gas and can produce gas from remote fields where reserves numbers are smaller. While conventional, land-based LNG projects focus on an estimated 70 to 80 fields with gas reserves greater than 5 Tcf, there are more than 1,400 small to medium-sized fields with reserves between 25 MMcf and 5 Tcf that provide a target market of approximately 150 Tcf that can be developed using floating LNG technology.

In November 2009, BG Group and Petrobras announced a joint Santos Basin gas development that will focus on developing FLNG as an additional option to commercializing associated gas in the Santos Basin presalt offshore Brazil.

Under the agreement, FEED contracts will be awarded for a new FLNG vessel that will operate close to the planned Santos Basin floating production, storage, and offloading (FPSO) vessels. The FLNG will process and liquefy the associated natural gas from the presalt fields before offloading to LNG carriers.

The unit is expected to be able to process up to 14 MMcm/d of associated gas. The 3 mmtpa of produced LNG would be shipped either to Petrobras-operated regasification terminals at Pecém and Guanabara Bay to supply the Brazilian domestic market or exported to other global markets.

The tender for the development of the FLNG FEED project was issued in August 2009. In October 2009, several consortia consisting of international suppliers with liquefaction and FPSO construction experience were invited to present their initial proposals.

FEED contracts were to be awarded in December 2009 to up to three of the consortia invited to bid in accordance with the qualification criteria established for the tender process. The decision to develop separate FEED projects in parallel was intended to foster competition between the consortia, contributing to a reduction in the overall cost of the FLNG vessel.

Successful bidders will prepare their FEED proposals through 2010. BG Group and Petrobras anticipate making the final investment decision in 2011.