Companies traditionally have spent significant amounts of time and money in defining the capabilities of gas field development sites. This process, involving the identification of components required to develop and operate a field, can take up to five years before the delivery phase can even begin.

International energy consultancy provider Add Energy, partnering with Transborders Energy (TBE), has created a step change in the way smaller and stranded gas field development is executed.

This business model for the FLNG industry is intended to free up small-scale stranded resources around the world and establish a new concept in global gas field development.

The challenge

By 2040 it is forecast that global energy demand will increase by 30%, with natural gas demand growing by 50%. Based on its mobile nature, LNG will facilitate the global integration of gas markets as supply sources increase.

Nonetheless, the LNG market is oversupplied. LNG development is focused on fields with large-scale volumes between 141.5 Bcm and 283 Bcm (5 Tcf and 10 Tcf). However, a supply shortage in LNG is expected from mid-2020 due to demand growth and a failure to proceed with new megaproject developments.

Large-scale LNG projects typically involve up to five years of FEED work and a further six years for engineering, procurement and construction (EPC) activities, but new projects need to progress now to capture this upside.

With key forces driving commoditization in the LNG industry, the potential is ripe for industry stakeholders to grab and capture smaller opportunities in the changing business landscape.

Moving into its most significant expansionary phase to date, the LNG industry is seeing supply racing ahead of demand in the short term, but this picture is expected to change dramatically as demand for LNG, particularly in Asia and led by China, is forecasted to grow.

A significant number of smaller stranded and previously uneconomic gas fields exist globally. New technology and innovative business models have enabled the economic exploitation of these resources to ensure that global supply will be able to meet the increase in LNG demand in the next decade.

Global natural gas demand is expected to grow by 50%, and LNG will facilitate the global integration of gas markets as supply sources increase. (Source: Add Energy)

 

The solution

TBE, with partners Add Energy and TechnipFMC and technical adviser for feasibility and technical study MODEC, is hoping to use emerging but proven technologies and stranded gas resources to carve a niche in global energy markets.

The four companies are targeting a stressed market with the view to position themselves in a strong gas delivery position by 2023. They plan to select an undeveloped field this year, with a final investment decision (FID) by 2020 and first gas by the mid-2020s, paving their way into the commoditized industry.

The team will generate a step change in industry value creation through these steps:

  • Deploying its predetermined low-cost small FLNG concept;
  • Selecting already discovered but stranded resources that fit the concept;
  • Implementing innovative financing and commercial structures;
  • Differentiating the value proposition to LNG buyers;
  • Delivering with a small-focused, high-caliber team; and
  • Replicating the concept on multiple resources.

Although the move to a FID by 2020 is ambitious, the team sees the schedule accelerated with the support of upfront concept selection rather than finding a resource and trying to develop a production solution based on that.

The driving force behind the new business model is recognition that the trend for large-scale LNG megaprojects may have run its course. In financially challenging environments such large, capital-intensive projects are challenged by FIDs, and although that will hamper a growth in supply, demand will continue to grow.

To combat this, the team has opted to avoid “going big” and chasing the fantasy of efficiencies of scale and instead has opted to “go small” to maintain a feeling of being lean and in control.

The concept enables the development of smaller, previously uneconomic resources at a much faster pace than that of megaprojects and will help feed the growing demand for energy, initially in Asia and elsewhere.

A new business model

The new business model targets discovered gas resources of about 14 Bcm to 57 Bcm (0.5 Tcf to 2 Tcf) of gas that have little value to their current owners because they are either in remote locations where tieback is capital-intensive or lack an economically viable development concept.

Key to the model is the deployment of an innovative small-scale FLNG vessel. Rather than investing up to five years in identifying a gas resource, understanding its size and potential and creating a bespoke development concept, the new model establishes a predefined concept incorporating the use of an ≈1-million-tonper- annum FLNG vessel and applies it to fields that fit the concept.

This low-cost concept represents a radical change in gas field development and could unlock many of the world’s previously uneconomic smaller natural gas plays, generating billions of dollars in the process.

TBE Managing Director Daein Cha explained, “The economies of scale pursued by megaprojects have not eventuated. They are too capital-intensive and risky in terms of resilience and fl exibility for what is a commoditizing business.

“However, the deployment of this predetermined lowcost small-scale FLNG concept on already discovered but stranded resources with innovative financial and commercial structures delivered by a small but highcaliber team establishes a new value proposition to the resource owners and LNG buyers.”

The plan

TBE has identified 16 appraised assets in Australia containing about 566 MMcm (20 Tcf) in total. The company believes it could support a development within the Bonaparte, Browse and Carnarvon basins, and negotiations are ongoing to secure an operated position among its shortlisted assets.

“Instead of starting from the resource and optimizing the facilities to monetize that resource, we have developed a low-cost facility, and based on that, we are looking at resources that fit that concept,” Cha said.

Add Energy will be responsible for the drilling operations, maintenance, safety and risk management of the projects and is the exclusive partner to engineer, procure, drill and operate the wells.

TechnipFMC is the exclusive partner for TBE to EPC and install (EPCI) the subsea umbilicals, risers and fl owlines and the FLNG vessel.

MODEC is the technical adviser for the EPCI of the hull, LNG tank and turret mooring system of the FLNG vessel together with the operations and maintenance of TBE’s FLNG vessel.

Offshore Australia has been identified as suitable for an initial pilot project, with a target resource to be confirmed in 2018 and the project to reach a FID by 2020. TBE is also in discussion with resource owners of other jurisdictions to pursue global opportunities.


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