18/03/2009 - 22:00

Floating facility a key goal for LNG

18/03/2009 - 22:00

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THE global gas industry could be on the brink of having its first floating liquefied natural gas (LNG) production facility, and there is a likelihood this technology will be in Australian waters in the next decade.

THE global gas industry could be on the brink of having its first floating liquefied natural gas (LNG) production facility, and there is a likelihood this technology will be in Australian waters in the next decade.

The concept of floating LNG plants has been under discussion for many years.

For instance, floating LNG was one concept seriously explored in the mid 1990s for development of the Bayu Undan gas field in the Timor Sea.

Project developer ConocoPhillips opted instead for the conventional approach of building a pipeline to the mainland and establishing its LNG plant at Darwin.

Building and operating an LNG production facility on a vessel moored offshore is an enormous technical challenge.

Despite this, it is seen as a likely means of commercialising stranded gas fields in remote locations.

Three projects off the coast of Western Australia are seen as candidates for a floating LNG production vessel, led by Shell's Prelude gas development off the Kimberley coast.

Shell announced last June that it had invited three consortia, comprising shipyards and engineering firms, to submit tenders for a floating LNG facility for Prelude with a production capacity of 3.5 million tonnes per annum.

Speaking at the time, Shell executive vice-president for gas and power in Asia, Jon Chadwick, summed up the attraction of floating LNG.

"Shell's FLNG solution enables the development of previously uneconomic natural gas resources far from shore and enhances the ability to operate responsibly in environmentally-sensitive areas," he said.

"The elimination of pipelines and onshore liquefaction facilities means FLNG projects will have a considerably reduced social and environmental footprint".

A second possibility for FLNG is the Sunrise gas field in the Timor Sea, jointly owned by project operator Woodside Petroleum with Shell and ConocoPhillips.

Woodside is evaluating two development options - a floating LNG vessel, or piping the gas to Darwin. It has not specified the likely output from this field.

The third prospect is the Scarborough gas field, located 250 kilometres off the Pilbara coast and jointly owned by ExxonMobil and BHP Billiton.

Up until about two years ago, BHP was actively pursuing the option of piping the gas to a new LNG plant near Onslow, dubbed Pilbara LNG.

However the more likely development option is considered to be a floating LNG plant.

Pöyry consulting manager Larry Narraway sees floating LNG as one of the big "game changers" for the industry.

"One is coal seam gas. If CSG takes off it's a real game changer because it means, strategically, you have diversified your supply, so the buyers are very interested," Mr Narraway said.

"The other game changer is floating LNG. You won't have a lot of the normal constraints associated with project development, like scheduling and approvals for onshore work."Offshore LNG facilities can take different forms.

The recently completed Adriatic LNG terminal, located off the coast of Italy near Venice, is a concrete gravity base structure that measures 180 metres long, 90 metres wide and 50 metres high and rests on the seabed.

The structure has internal steel tanks able to store 280,000 cubic metres of LNG, while the re-gasification plant on the top can process 1.1 million cubic metres per hour.

Floating LNG facilities may also be developed on a more traditional shipping hull.

This provides a potential boon for shipbuilding companies. It is anticipated that because of declining freight rates and a lack of financing, contracts for new vessels may tumble by half this year.

However, as vessel orders plunge, companies such as Samsung Heavy Industries, Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering Co will be counting on floating LNG to hold up earnings.

These South Korean companies are understood to have submitted bids for Shell's floating LNG facility for the Prelude gas field development, which may cost $5 billion or more.

Samsung already has orders to build four floating LNG vessels by 2012 valued at more than $1.2 billion, for Finnish company Flex LNG, which aims to commercialise the world's first floating natural gas liquefaction units.

Flex LNG recently pushed back the vessels' delivery date.

However, it continues to develop its project portfolio as the company believes the long-term business case for its floating LNG units remains robust despite challenging current financial market conditions.

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