Conceptual studies

However, in recent years, the rising global demand for gas has caused many energy companies to refocus their attention on the development of their gas reserves. Long-term global gas demand fundamentals remain strong despite the global recession and the Asian consumer base is expected to recover to its 2008 import levels by 2011. From that period onwards, the LNG industry is likely to move from a supply surplus to a deficit. This is because major onshore liquefaction projects have been delayed in recent years and continue to see delays in final sanctioning.
Vast gas reserves are located far from any existing infrastructure such as pipelines and gas processing facilities and therefore the construction of onshore LNG terminals is often unfeasible. The Timor Sea Joint Petroleum Development Area, is an excellent example of this, as subsea pipelines to the nearest shore (in this case Timor-Leste) would have to cross the Timor Trench, which reaches a depth of 3,300m at its deepest point. FLNG has been seen as a potential solution to this problem and many fields in this area – such as Prelude and Greater Sunrise – have been identified as possible FLNG vessel locations.
Solution to problem of associated gas?
FLNG liquefaction has also been seen as a potential solution to the problem of associated gas – gas that is produced during oil exploration and production. In areas where there is little infrastructure for the gas it has traditionally been re-injected or flared, which is extremely wasteful as well as damaging to the environment. Mid-size FLNG vessels (1-2 mmtpa) are seen as a viable way to allow utilisation of these smaller quantities of gas.
Despite its potential benefits, as mentioned previously, moving liquefaction technology offshore creates design challenges, particularly regarding the reduction in size or ‘footprint’ of the necessary liquefaction or regasification process equipment in order that it can be accommodated on a vessel. Other challenges include the use of specific containment and offloading systems.
For example, sloshing, which occurs when the movement of the ship causes a violent liquid motion in the tanks, is a major problem in the storage of liquefied gas – and is heightened when the vessel is partially full. Membrane-type containment systems, which are found on over half of the current LNG carrier fleet, are particularly vulnerable to sloshing damage and therefore are mostly unsuitable for situations where the vessels spend a large amount of time partially loaded, such as FLNG liquefaction terminals.
The Kvaerner-Moss Spherical containment system is also relatively unsuitable for FLNG liquefaction applications as it limits deck space, which is needed for the all-important topsides.
Potential FLNG liquefaction vessel designers are increasingly moving away from the existing systems mentioned above to either IHI’s prismatic SPB, which is currently operational on two LNG carriers, or to new prismatic containment systems that are designed specifically for FLNG applications, systems such as Aker’s Aluminium Double Barrel Tank (ADBT) and Sevan Marine’s LNG FPSO containment system. These systems are sloshing resistant and offer a flat deck space. The majority of FLNG vessel designs revolve around new builds. However, the world’s first LNG carrier to LNG FPSO conversion is likely to be the Arctic Spirit – one of the two existing carriers with a prismatic containment system.
Both membrane and spherical-type containment systems have been successfully used on FLNG regasfication vessels. These vessels are often located in sheltered ports such as Bahia Blanca in Argentina, Pecém and Guanabara Bay in Brazil and Teesside in the UK where weather and ocean conditions are less severe than the open sea. The deck space required for regasification equipment is also much lower than for liquefaction, which allows FLNG regasification developers such as Golar LNG to convert their spherical-type LNG carriers to floating, storage, regasification units (FSRUs).

Ship-to-ship transfer

As for offloading systems, ship-to-ship transfer is currently one of the least proven technologies in the LNG Industry and therefore is the focus of much research, design and testing. Most of the operational floating regasification terminals use loading arms, similar to those that have been used at onshore terminals for more than 40 years. This technology is proposed for Flex LNG’s LNG Producer vessels. Flex has an EPC contract agreed with Samsung Heavy Industries for four of these vessels. Side-by-side offloading, which is likely to be the most common use of loading arms in offshore situations, has its problems. Sea states of more than approximately 2.5m significant wave height are likely to make side-by-side offloading impossible. In areas where such sea states prevail a different solution is required.
An alternative offloading system is a cryogenic hose. This is designed to be used in situations where hostile sea conditions make it difficult to use loading arms. The first transfer of LNG between two vessels using cryogenic hoses took place at the UK’s Teesside GasPort in 2007. Since then this emerging technology has been the focus of much research and development.
FLNG liquefaction technology may still be a challenge, but FLNG regasfication is already a proven technology, with five operational terminals in Brazil, the UK and the USA, and is fast becoming the solution of choice for countries that want fast-track or temporary import solutions. While onshore terminals still retain their comparative advantage when larger import capacities and storage are required, FLNG’s advantages lie in its quick lead times and flexibility. Focus areas for FLNG regasification terminal development include Western Europe and the Mediterranean rim, parts of the Middle East and Latin America. The cost and construction time advantages are proving alluring even in countries such as India and China, which have traditionally favoured onshore development solutions. Indonesia, with its stranded gas fields and rapidly growing cities, is a focus for both floating liquefaction and regasification terminals.
In the past, the USA has been seen as a major driver of FLNG activity. The country has two FLNG regasification terminals in operation: in the Gulf of Mexico and offshore Boston, Massachusetts. However, many promising offshore projects in the USA have been delayed, due to a number of factors including the strict regulatory system, not-in-my-back-yard attitudes, and environmental concerns regarding the open-loop system and its effects on marine habitats. The unprecedented increase in domestic unconventional gas reserves such as shale gas, seen recently, has also caused some developers to rethink their plans for importing LNG into the USA. Ultimately the USA is still likely to require significant LNG imports to meet demand post 2015. In the meantime, import levels are likely to be determined by the balance of the cost of shale gas production (which is comparatively expensive) against spot prices for LNG cargos.
Douglas Westwood Limited forecasts $23 billion to be spent on FLNG facilities over the 2010 to 2016 period. Despite a large number of FLNG regasification projects, the vast majority of this capital expenditure 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.
The capex forecast is the output of a market model built on a project-by-project review of development prospects, with the timing of expenditure phased to reflect likely project structure. This model has been developed in consultation with industry experts and also sense-checked to account for external factors such as supply chain constraints. The forecasts are segmented by services such as technology licensing, front end engineering and design, project management and detailed design engineering, construction engineering (field engineering), construction and installation (hook-up and commissioning).
Australasia and Africa, due to their FLNG liquefaction projects, account for the biggest proportion of forecast capex. North America, despite having the largest number of import terminal prospects is only expected to account for $1.6bn or 7 per cent of the total capex between 2010 and 2016.
In conclusion, then, it is clear that, within the last year, interest in FLNG (both liquefaction and regasification) has grown substantially. This is a trend that is likely to continue over the next seven years. Commitment from majors such as Shell in the groundbreaking floating liquefaction sector serves as an indicator of the confidence in the future of the FLNG industry.
Australasia and Africa remains the focus of FLNG liquefaction projects, largely due to the number of stranded gas fields in region as well as concerns over gas flaring. FLNG regasification projects are focused on countries which experience or are expecting to experience seasonal demand spikes and therefore need fast-track projects in order to meet this increased demand.

*The World FLNG Market Report 2010-2016 costs £3,250. Further information can be found at www.dw-1.com. Douglas-Westwood is an independent employee-owned company and the leading provider of business research & analysis, strategy and commercial due diligence on the global energy services sectors.

**Lucy Miller is an analyst with DWL and has conducted market analysis on a variety of DWL’s commissioned research projects for clients in the oil and gas sector. Ian Jones is an analyst with DWL, contributing to the firm’s commissioned research, commercial due diligence and published market studies in the oil and gas and renewable energy sectors.