Learn more about Hart Energy Conferences
Get our latest conference schedules, updates and insights straight to your inbox.
FLNG offers oceans of possibilities for keeping the LNG industry economically afloat if operators can bring costs under control, Sanford C. Bernstein & Co. LLC maintains in a new report.
“Up to now we have viewed this technology as largely niche—but increasingly this is hard to do,” Bernstein senior analyst Neil Beveridge states in the report, in which he adds that 10 FLNG vessels are under construction around the world. “Floating regas capacity has come from nowhere to 10% of global [regasification] capacity in only a few years.”
The technology has long been viewed as the key to unlocking stranded gas fields, Beveridge said, but now it is also qualifies as a badly needed approach to cut costs. The cost per ton to build an LNG project has soared from $1,000 10 years ago to almost $4,000 on some of the pricier Australian projects today.
“While the costs of alternative energies, such as wind and solar have been falling, [onshore] LNG costs have been rising,” he said. “This is not sustainable in the low carbon world of the future.”
He drew attention to the world’s largest project, Prelude, which will be deployed in the Browse Basin’s Prelude field, about 295 miles northeast of Broome, Australia. Over the 25 years of its anticipated deployment, the facility is expected to develop 3 Tcf of resources, including liquids, LNG, condensate and LPG.
The report estimates total capex for the project at about $12.7 billion or about $2,400/ton, not counting likely cost overruns. Still, that is well below the $4,000/ton estimate for Chevron’s Gorgon onshore LNG field.
FLNG enjoys a relatively lower capex and its vessels eliminate much of the midstream infrastructure and land acquisition costs that hamper onshore projects. Another avenue of savings is labor.
“With labor costs amounting to roughly 30% of total project costs, another $2 billion to $3 billion savings can be made through using Korean welders instead of expensive Australians,” the report points out.
The vessel’s mobility offers positives in the arena of geopolitical risk, Beveridge wrote, noting that onshore LNG projects in Libya and Yemen have been shut in as a result of unrest.
“We would not be surprised to see FLNG used in Iran as a way to not only accelerate LNG production, but also mitigate political risk,” he said.
Floating facilities have their disadvantages, as well. Bernstein analysts acknowledge high operating expenditures and lower operating efficiencies than experienced by onshore plants. While an onshore LNG plant can expect an operating of around 98%, its offshore counterpart will likely have efficiency of around 90%, or about the same performance of early floating production storage and offloading vessels (FPSOs).
Among companies to watch as momentum builds in this sector are Woodside and Inpex on the E&P side, and Technip and Samsung Heavy on the construction side. The pure play FLNG company that stands to benefit the most from this trend, Bernstein thinks, is London-based Golar LNG.
Joseph Markman can be reached at jmarkman@hartenergy.com.
Recommended Reading
Beach Town Corpus Christi Grows into America’s Top Energy Port
2024-01-16 - The Port of Corpus Christi is the U.S.’ largest energy export gateway and in terms of total revenue tonnage as increased midstream investments have opened export markets for the prolific Permian Basin.
ONGC’s M Field Starts Production in Bay of Bengal
2024-01-09 - ONGC’s M Field represents the second phase of the larger 98/2 Block development project which is expected to reach peak production of 45,000 bbl/d and 10 MMcm/d.
Light Oil Discovery Made Offshore Namibia
2024-01-11 - Galp Energia said a significant light oil discovery was made in the Orange Basin and a drill stem test will be performed to assess the discovery’s commercial viability
Range Resources Expecting Production Increase in 4Q Production Results
2024-02-08 - Range Resources reports settlement gains from 2020 North Louisiana asset sale.
To Dawson: EOG, SM Energy, More Aim to Push Midland Heat Map North
2024-02-22 - SM Energy joined Birch Operations, EOG Resources and Callon Petroleum in applying the newest D&C intel to areas north of Midland and Martin counties.