Why Global LNG Growth Needs Both Floating Liquefaction and Regas Platforms

By Johnny Wood

Just a few years back, natural gas liquefaction plants were almost entirely land based. But a booming global market has seen LNG projects leaving terra firma and venturing out to sea.

Of course, LNG is no stranger to the ocean waves, having already been stored in floating storage regasification units (FSRU) instead of onshore terminals in some parts of the world.

Now, natural gas is actually being extracted and liquefied at sea, using floating liquified natural gas (FLNG) projects which are reshaping both the supply of, and demand for, natural gas.

Delivering LNG Direct to the Carrier

Global demand for natural gas is set to increase by between 1.5% and 2% over the next 25 years, with much of the growth taking place in remote or inaccessible locations where delivering gas by pipeline is either impractical or cost-prohibitive.

The recent trend of basing production offshore has many advantages when liquefying natural gas from offshore fields. Pipelines connecting the supply to shore-based liquefaction plants are unnecessary, as floating plants can produce the liquified gas and then directly transfer it to LNG carriers for transportation around the world.

Positioned at sea, FLNG platforms can avoid both costly land requirements and time-consuming permitting restrictions.

Speaking at Gastech 2019, Golar LNG CEO Iain Ross commented on the industry trend towards floating plants. “FLNG solves many problems by bringing a mechanically complete and partially commissioned facility straight out of the shipyard to an offshore location,” he explained.

In 2013, Golar’s management made a strategic decision to convert the Golar Hilli LNG carrier on a speculative basis to an FLNG facility. Unlike land-based plants, the FLNGs can be redeployed from one gas field to another, when an existing reservoir is no longer viable, allowing facilities like Hilli to retain a high residual value.

Floating plants can make smaller gas reservoirs competitive, where building land-based infrastructure would otherwise be too costly. It also opens up parts of the world previously inaccessible to LNG.

“FLNG comes as an alternative to land-based facilities and can be a complement,” said Ross, explaining the dual role of floating facilities in adding value to the industry. “We believe our solution can deliver an outcome which is highly competitive at around $500 per metric ton.”

Currently, three of four completed FLNGs – including Hilli, which was built in 1975 and converted in 2017, with 2.4 mtpa capacity – are operational, with a fourth in transit to a production site in Argentinian waters. And demand is growing, with three more floating platforms currently on order and 28 other projects at different stages of planning and design.

Minimizing Initial Costs

As natural gas has grown in importance, there has been a spike in the number of terminals to store and regasify LNG imports, which have quadrupled since the start of this century. Back then, just five nations had LNG import terminals. Today, there are LNG import and regasification facilities in more than 40 countries.

Currently, FSRUs account for 15% of the global LNG regasification capacity, which, including terminals currently under construction, is set to increase to 18% by 2022, according to IMA/World Energy Reports figures.

Floating storage and regasification units share many of the benefits of FLNGs and demand for them is growing, particularly in areas without the space, time or infrastructure to build an onshore regasification terminal.

These floating platforms are an attractive proposition for the emerging economies of regions like Asia, which can minimize initial costs by leasing platforms rather than building their own land-based facilities. FSRUs offer a turnkey solution, which can be built and delivered comparatively quickly, and relocated to accommodate seasonal changes or fluctuations in LNG import demand.

In addition to moving production and regasification to the water, even the use of LNG to generate power has taken to the seas. Mitsubishi Heavy Industries (MHI) Group is pioneering floating power plants, which can be deployed to bring electricity to offshore communities, eliminating the need for costly undersea power cables.

These mini power plants come with regasification facilities, storage tanks and generation systems, fueled by LNG stored on carrier vessels moored alongside. One barge can generate more than 3000,000 kW, providing electricity to 150,000 people, either as a temporary resource or a permanent power supply.

For both emerging economies and developed nations, floating LNG facilities can provide an affordable and accessible fuel supply that can be brought online quickly and support the transition to cleaner energy. Looking to the future, there could be many more floating LNG facilities on the horizon.

Johnny Wood has been a journalist for over 15 years working in different parts of the world – Asia, Europe, and the Middle East. As well as an accomplished features writer he has edited several prestigious lifestyle magazines and corporate publications.