LNG focus

LNG battles the deep freeze

Industry hopeful that commodity price slump will eventually be beaten

Photo: SEIC
20   
global outlook
LNG industry
faces an
uphill battle
International Energy Agency says new liquefaction
projects will struggle to get off the ground unless
commodity prices recover
AmAndA BAttErsBy
singapore
T he global liquefied natu-
ral gas industry faces an
uphill battle due to its
capital intensive nature
against the backdrop of the con-
tinuing commodity price slump.
Projects currently under con-
struction are likely to come into
operation as planned because sub-
stantial upfront capital expendi-
ture has already been incurred.
however, new liquefaction
projects will struggle to get off the
ground, according to the Paris-
based International energy Agen-
cy (IeA).
Today LNG prices simply do not
cover the capital costs of new
plants. Several projects have al-
ready been scrapped or postponed,
and the number of casualties will
rise if prices do not recover,
claims the IeA.
Proposed LNG projects are soft
targets for investment reductions
and several of them are likely to be
delayed or even cancelled,
according to the agency. Final
   
investment decisions taken in the
next two years will determine the
amount of incremental LNG avail-
able early in the next decade.
If the current low prices persist,
LNG markets could start to tight-
en up substantially by 2020, says
the IeA in 2015 Medium Term Gas
Market Report. In the shorter
term however, the global LNG
market will have to cope with a
flood of new supplies.
Global LNG export capacity
additions through 2020 will
amount to more than 40% of last
years existing infrastructure,
with almost half of the incremen-
tal supply due to come on line in
2016 and 2017.
Conventional and coal seam gas
(coalbed methane) LNG projects
are coming into operation in Aus-
tralia, which will overtake Qatar
as the number one producer, and
also from the US, which not so
long ago was being touted as a
major LNG importer.
Australia and the US will
focus
 
LNG
account for some 90% of the new
LNG volumes entering the market
through 2020.
Large quantities of flexible
supplies from the US are on the
way, says IeA executive director
Maria van der hoeven.
But from a consumer stand-
point, the economic attractive-
ness of the henry hub-linked
model has narrowed substantially
relative to the traditional oil-
based one. What the impacts will
be on the next generation of LNG
projects remains to be seen.
Increased expenditure Doug-
las-Westwood (DW) forecasts cap-
ital expenditure on global LNG
facilities will total $241 billion be-
tween 2016 and 2020, which repre-
sents a 34% increase versus the
preceding five-year period.
however, Mark Adeosun, author
of DWs 10th LNG World Market
Forecast, admits with commodity
prices depressed, future LNG
projects are uncertain, as those
 
which are currently in front-end
engineering and design are strug-
gling to make economic sense in
the low price environment.
Adeosun says that the advent of
the US as a major LNG exporter is
likely to be slower than originally
envisaged. Of the 20 US terminals
proposed in the US, 11 were
planned for start-up between 2016
and 2020.
however, DW reckons that only
six of these will now be up and
running by the end of the decade.
The approval process for US on-
shore liquefaction projects re-
mains slow and this will limit the
increase in regional LNG expendi-
ture through the rest of the dec-
ade, according to DW.
The energy Intelligence Agency
(eIA) expects gross US LNG exports
will this year increase to an average
of 700 million cubic feet per day
with the start-up of Cheniere en-
ergys Sabine Pass facility.
The US eIA projects gross US
LNG exports in 2017 will average
29January2016
1.4 billion cubic feet per day as
Sabine Pass ramps up its capacity.
Cheniere now envisages the
first commissioning cargo from
Sabine Pass to leave in late Febru-
ary or March rather than this
month as was earlier expected.
however, interim chief execu-
tive Neal Shear says the partners
anticipate no issues in meeting
all contractual targets and guar-
anteed completion dates.
Additionally, construction for
trains two to five continues to be
on an accelerated schedule and
these trains are expected to come
on line on a staggered basis, says
Shear.
The LNG markets need a further
65 million tonnes per annum-plus
capacity to take final investment
decisions this decade to avoid a
tight market by the mid-2020s, ac-
cording to McKinseys energy In-
sights.
Despite low oil prices and a
weak medium-term outlook, the
LNG market has a bright future.
29 January 2016
focus LNG 21

Impacts: International Energy

Global demand slows gradually
Agency executive director Global liquefied natural gas
Maria van der Hoeven
Photo: WGC
demand is forecast to reach 400.6
million tonnes in 2020, up from
238.2 million tonnes last year,
writes Amanda Battersby.
However, this could still
translate to 20 million tonnes of
overcapacity come the end of the
decade, says market research
agency ReportsnReports.
Global lNG demand is now
seen increasing by 2% per annum
to 2020, slower than the 2.3%
projected a year ago, according to
the International Energy agency
(IEa).
a significant reason for the
downward revision in global gas
demand is weaker than expected
growth in asia, where
persistently high prices had
until recently caused consumers
to switch to less expensive
options such as coal.
The belief that asia will take
whatever quantity of gas at
whatever price is no longer a
given, says Maria van der
Hoeven, the IEas executive
director.
North asian stalwart
customers Japan and South
risk of
oversupply
Increase expected to be
2% per annum until 2020
Korea are looking to reduce the
amount of lNG that they
purchase on long-term contracts,
while China has been scaling
back on its spot purchases of
late.
The latest devaluation of the
yuan by China has reportedly
dampened Chinas independent
buyers enthusiasm for US
dollar-denominated lNG
imports, at least for the time
being. However, the falling lNG
prices are expected to translate
into increasing shipments into
Europe through the rest of the
decade.
Europes growing import
needs might well offer a
welcome outlet to lNG exports
struggling to find a home, and
the IEa expects European lNG
imports to approximately double
between 2014 and 2020.
The global lNG market is
shifting in the buyers favour
after being tight for a few years,
say sources, who add that
customers are increasingly
looking to renegotiate existing
deals.
We expect the market to shift
completely in buyers favour
from 2017 with the foray of US
and australian lNG supplies.
lower than expected demand
growth rates coupled with
commencement of new projects
is forcing the shift in global lNG
markets, says ReportsnReports.
There might be a shift in
contractual models and buyers
might soon have the upper hand
but the longer-term market
outlook remains buoyant,
according to French major Total,
which sees annual lNG demand
growth of 4% from 2015 through
2030.
The global market will be
driven by asia, where demand
for lNG will double between now
and 2030, Totals gas president
laurent Vivier said last year.

There is the need for around 15

new LNG trains by 2025 and over
From a
double that by 2030, the McKin- consumer
sey report says.
Players should look past the standpoint,
structural loose market in the me-
dium term and push ahead with the economic
final investment decisions for this
growing market.
attractiveness
of the Henry
Positive outlook LNG markets
have a much more positive longer- Hub-linked
term outlook. Demand is forecast
to increase on average between 4%
model has
and 6% annually until 2030, so the narrowed
market needs to take a final in-
vestment decision on a further 20 substantially
million tpa or so by late 2017 or
early 2018 to bring it to market by
relative to the
2030. traditional
A final investment decision will
need to be taken on another 45 oil-based one.
million tpa by the end of the dec-
ade so that these volumes are International Energy
ready to enter the market in 2025. Agency executive
Otherwise from 2023, we qui- director Maria van
etly enter a very tight global LNG der Hoeven
market, says Energy Insights.
22   
Double
blow for
Trinidad
ATlAnTic lnG
projecT
Caribbean scheme
faces volatile future
THE near-term future of lique-
fied natural gas supply from
long-time producer Trinidad &
Tobago is as volatile as it has
ever been, as producer Atlantic
LNG grapples with low supply,
increased government scruti-
ny and a drastic change in
ownership, writes Noah Brenner.
Natural gas production off
Trinidad has fallen from a high
of 4.2 billion cubic feet per day
to 3.8 Bcfd due to low upstream
investment and ongoing main-
tenence programmes.
Atlantic LNG has been oper-
ating below its nameplate
capacity of 15 million tonnes
per annum and is likely to see
production crimped by 13% to
15% through late 2017, when UK
supermajor BP is expected to
bring on additional supply of
up to 590 million cubic feet
per day from its offshore
Juniper platform, says Atlantic
chief operating officer Arlene
Chow.
It is like we have a double
whammy here in Trinidad
these days, we have the lower
oil prices and we also have the
gas shortfalls, Chow says.
To further complicate mat-
ters, newly-appointed Trinidad
& Tobago Energy Minister
Nicole Olivierre has questioned
whether Atlantics member
companies are adhering to
their various contracts.
Those contracts were set up
under the assumption that
Atlantics output would go to
the US, but most cargoes are
now diverted to customers in
South America.
With many of our commer-
cial pricing arrangements tied
to a US destination, this coun-
try is realising netbacks well
below the actual market price
applicable to the true destina-
tion of our cargoes, Olivierre
says.
The only conclusion that
can be drawn is that the con-
tractual arrangements for the
marketing of LNG are not now
working in the best interest of
Trinidad & Tobago.
Olivierre has pledged to re-
visit the various contracts un-
derpinning Atlantics opera-
tions but has given little detail
of which contracts those are
and whether she would seek to
reopen them before they come
due.
Dealing with these un-
certainties will fall in large
part to Atlantics new majority
shareholder, Shell, which
bought out Repsols stake in the
project in a deal announced in
2013 and will control a majority
shareholding in each of Atlan-
tics trains when its takeover of
BG Group is complete.
Shell declined to comment
as Upstream went to press.
  
focus
  
LNG   29January2016
us
Consolidation likely befor
Predicting the future of the US industry beyond the current downturn is
difficult but long-term global LNG demand should create a fresh need
for exports and US players are already jostling for position
NOAH BRENNER
Houston
THE future of the US liquefied
natural gas business is likely to
look significantly different than it
does today as the sector matures
over the next decade.
The sector is likely to see sig-
nificant consolidation, or at least
changes in ownership, as projects
move from speculation to con-
struction and eventually produc-
tion, says Erik Codrington, project
finance managing director at the
Bank of Tokyo-Mitsubishi.
The bank is the lead lender for US
projects such as Cheniere Energys
Sabine Pass and Corpus Christi
projects as well as Freeport LNG
and Cameron LNG.
Once these projects are up and
running it would not surprise me
if maybe some of them changed
hands, he says. Or some of the
original investors changed out be-
cause you are going from a kind of
risky developmentstage project
to a more mature almost utility-
type asset.
The dynamic may be similar to
what has already been seen in the
US onshore midstream space.
We find smaller developers
that construct pipelines, once
they are constructed they will of-
ten sell out to larger companies
who have lower cost of capital and
lower return expectations, and
are maybe better at being low-cost
operators, Codrington says.
Thinning the herd The master
limited partnership (MLP) struc-
ture that many midstream com-
panies embraced is being sorely
tested during the downturn but
the regular fees paid by compa-
nies to lease liquefaction capacity
at US facilities would fit well into
that business model.
It wouldnt surprise me if a lot
of these either converted to an
MLP structure of their own or
were acquired by MLP players,
Codrington says.
Long-term, he sees the need for demand and they are tailoring Decade was founded with the idea for their LNG. However, Codring-
the development of an additional their projects for just that scenario. of leading the second wave of US ton does not believe the industry
three to four trains of LNG capacity I think that these conditions LNG exports, and we are still on is in danger of over-building in
per year to meet growing world will thin the herd, and the strong track to achieve this, she says. the way that plagued the US LNG
demand, and of that capacity, US projects with strong companies import industry.
players might win contracts for behind them are going to be the Appetite Yet, if the global mar- From a financing perspective I
one to two trains. ones that benefit and move for- ket only has appetite for an addi- dont see that as a danger, he says.
Many in industry believe the ward, says Kathleen Eisbrenner, tional train or two per year from The liquefaction projects are not
current pause in contracting will chief executive of NextDecade, the US, there is no way that many financed unless they already have
give way to a second wave of which is pursuing a pair of facili- of the facilities being proposed to long-term fixed offtake.
projects meeting this incremental ties on the US Gulf Coast. Next- US regulators will find offtakers But there is some danger of over-
US LNG ExPORT TERmiNALS APPROvEd ANd UNdER cONSTRUcTiON
Project Location company capacity
sabine Pass sabine, Louisiana Cheniere Energy 2.76 Bcfd
Cameron LNG Hackberry, Louisiana sempra 1.7 Bcfd
Freeport LNG Freeport, Texas Freeport LNG Development 1.8 Bcfd
Cove Point LNG Cove Point, Maryland Dominion 820 MMcfd
Corpus Christi LNG Corpus Christi, Texas Cheniere Energy 2.14 Bcfd
sabine Pass LNG (expansion) sabine, Louisiana Cheniere Energy 1.4 Bcfd
Total capacity: 10.62 Bcfd
us LNG EXPORT TERMINAL APPROVED BuT NOT uNDER CONsTRuCTION
Lake Charles LNG Lake Charles, Louisiana southern union 2.2 Bcfd
 29 January 2016
focus LNG 23

Trends in
re new contracting wave tech hard
to predict
Buyers wary of investing
in new technology
THE role of technology in the
LNG business both in the US and
abroad is a bit of a paradox,
writes Noah Brenner.
The industry has touted its
Maturing significant innovations but
sector: buyers, and therefore
workers at developers, are not always
Freeport LNG comfortable being the first one
in Texas to put the new designs into
practice, and instead return
time and again to decades-old
technologies.
Erik Codrington, project
finance managing director at
the Bank of Tokyo-Mitsubishi,
says he is seeing significant
interest in smaller-scale
technologies that can add
incremental volumes without
huge up-front investment.
Buyers are intrigued that
they could make smaller
commitments and help to
bootstrap a lower-cost
technology, he says. We
havent seen any of those move
forward yet but its out there.
At the same time, many
buyers are loath to take a
chance on new technology
when signing long-term,
multi-billion dollar offtake
agreements that depend on the
reliable operation of the plant.
Developers who push into
unfamiliar territory may have a
harder time lining up contracts.
A motto that I have is no
novelty is the new novelty,
meaning that our projects are
safe, reliable and use technology
proven and understood,
NextDecade chief executive
Kathleen Eisbrenner says.
Innovation for NextDecade lies
in how we do business and how
we work with our customers to
supply their LNG needs,
including the contract strategy.
Floating liquefaction has
garnered a lot of media
attention but it is still being
scrutinised by many in the
Photo: marketplace.
BLOOMBERG The banks are cautiously
interested in floating LNG,
Codrington says. There is a
building from large portfolio LNG its pretty difficult. You are likely open to offering a variety of sort of vertically integrate all the desire to see more track record
players such as ExxonMobil, BP to have overshoot and undershoot contract structures, whether its way back to the wellhead, he ex- around that but it makes
and Shell, which may not need given the very long lead times for taking a Henry Hub pricing or plains. They can buy reserves, facilities potentially reusable
such contracts because they are new LNG capacity. something totally different. they can contract for reserves, and allows access to places
keeping rights to their production. Here again, however, the flex- Even without such creative they can buy E&P players which where building out onshore
They might contract for more ibility of US offtake contracts contracting, US LNG projects fill a is something they dont have the infrastructure is not feasible or
than the market might bear but its could provide a much needed unique space in the industry be- ability to do in places like Qatar or is expensive.
their judgment, Codrington says. buffer, allowing the US to act as a cause the remainder of the US gas Algeria or Indonesia so they All of these potentially new
We are trying to forecast where true swing producer within the industry is also open to invest- have a lot of flexibility in access- schemes will face stiff
Asian and European LNG demand market. ment, Codrington says. ing different parts of the value competition from existing
is going to be five years from now Eisbrenner says NextDecade is If they choose to do so they can chain and hedging their risks. projects that are already trying
to grab larger market share.
Projects like Sabine Pass and
peNdiNG appLicaTioNs beFore Us FederaL eNerGy reGULaTory coMMissioN Cameron LNG already have
plans in the works to add
project Location company capacity incremental trains and such
Jordan Cove LNG Coos Bay, Oregon Jordan Cove Energy Project 900 MMcfd developments have the
Oregon LNG Astoria, Oregon Leucadia National 1.25 Bcfd advantage of having financially
Elba Island Elba Island, Georgia Southern LNG Company 350 MMcfd strong partners and
Magnolia LNG Lake Charles, Louisiana Liquefied Natural Gas Ltd 1.07 Bcfd construction contractors in
Golden Pass Sabine Pass, Texas ExxonMobil 2.1 Bcfd place.
Gulf LNG Pascagoula, Massachusetts Kinder Morgan 1.5 Bcfd Its either high-volume
Freeport LNG (expansion) Freeport, Texas Freeport LNG Development 340 MMcfd low-cost incumbents or new
Calcasieu Pass Cameron Parish, Louisiana Venture Global 1.41 Bcfd technologies that are pushing a
Cameron LNG (expansion) Hackberry, Louisiana Sempra 1.41 Bcfd low-cost lower-volume
technology where they can add
Total capacity: 10.33 Bcfd
smaller increments,
Codrington says.
24   
us
Open for business: Cheniere Energys Sabine Pass LNG terminal
Spectre of supply glut looms
Increased Australian output and falling demand in parts of Asia
means new US export projects face near-term problems
CAROLINE EVANS
Houston
W ITHIN weeks, work-
ers at Cheniere En-
ergys Sabine Pass
liquefied natural
gas terminal in Louisiana will be-
gin to load the first US LNG car-
goes flagged for export.
However, the US is entering the
international LNG market at a
challenging time. The market
faces a looming supply glut, a
volatile commodity price envi-
ronment and flagging Asian
demand.
Some fear a fresh infusion of
supply from the US could upset an
already depressed market. On the
other hand, the US entry offers
flexibility of supply in terms of
both destination and volume.
A recent study commissioned by
the US Department of Energy (DoE)
forecasts US exports will have a
marginally positive impact on
the market long-term. Shorter
term, however, is less rosy.
The US currently has five LNG
export projects that are expected
to come online by 2020, starting
   
with Sabine Pass, which is expect-
ed to load its first cargo in Febru-
ary or March.
This new capacity coincides
with increased output from Aus-
tralia, a continued slump in oil
prices, and weak demand in
north-eastern Asia, which puts
downward pressure on spot pric-
es, according to Anne Kat Brevik,
director of LNG forecasts and re-
search at Thomson Reuters.
Brevik expects Asian LNG spot
prices to trade between $4.50 per
million British thermal units and
$6 million Btu for most of 2016,
compared to an average of $7.50
million Btu in 2015.
Eye on Europe Although Asia is
thought to yield the best return
for US exporters, Brevik expects
Europe to be an attractive destina-
tion in the near term because it is
better able to absorb excess car-
goes without moving the price,
and it offers access to liquid trad-
ing hubs.
Due to the flexible nature of US
focus
 
lng
LNG exports and the considerable
difference in market depth be-
tween Europe and Asia, we expect
north-west Europe to receive a
significant share of US LNG ex-
ports, she wrote in a recent
report.
In addition, Brevik expects to
see an increase in short-term con-
tracts as traders ride out the low
prices.
The projected downward trend
in spot prices has another conse-
quence delayed construction on
new LNG export terminals.
Brevik expects projects already
under construction to go through,
but those awaiting a final invest-
ment decision will sit out the
downturn.
These projects would need an
offtaker on the other side in order
to go ahead with financing
and construction, Brevik tells
Upstream.
Andrew Slaughter, executive
director of Deloittes Center for En-
ergy Solutions, agrees.
Instead of seeing people take
 
final investment decisions in the
next two or three years for new
capacity in 2020, 2021, that gets
pushed out, Slaughter says.
Long-term hopes However,
Slaughter does foresee players
continuing the regulatory process
in the low price environment so
they can have permits in hand
when prices improve.
These are long-term projects,
he said.
You dont judge a projects prof-
itability over one particular mar-
ket condition. These in 20 to 25
years will be good projects, I
expect.
Beyond 2025, prices are expect-
ed to stabilise, leading to a robust
LNG market.
Many peoples concerns about
this were about disruption of sup-
ply or disruption of price, and I
think that this goes to say that
even at higher levels, thats an un-
likely outcome, Slaughter says.
Instead, both US LNG sellers
and their customers are expect-
29January2016
Photo: BLOOMBERG
ed to benefit from increased
trade.
The DOE found that increasing
LNG exports from 12 billion cubic
feet per day to 20 Bcfd by 2040
could add an additional $7 billion
to $20 billion to the US gross do-
mestic product annually.
Increased exports will also have
a huge impact in Asia long-term.
As US LNG exports rise to 20 Bcfd,
Henry Hub prices are expected to
increase slightly but Asian LNG
prices are expected to decline sig-
nificantly.
It really confirms that the sup-
ply curve in the US is quite long
and flat and can produce at eco-
nomic levels and grow production
rates, Slaughter says. Its not like
youre straining the capacity of
the supply system by throwing
more demand at it inordinately.
Brevik said prices could im-
prove long-term, but it depends
largely on oil prices.
I dont see a sharp revival in
LNG prices unless oil prices come
up, she tells Upstream.
29 January 2016
canada
Turning fantasy into reality
With more than
20 projects in the
proposal stage,
Canadas young
LNG industry has
hit the ground
running
TONYA ZELINSKY
Calgary
O NCE upon a time, in
boardrooms across
western Canada, execu-
tives used to tell stories
about liquefying natural gas and
exporting it to the Asian Pacific.
Today those same stories are
still being told but billions of dol-
lars in investment is helping
dreams come true.
In the past five years, LNG has
become one of Canadas fastest-
growing industries without any-
thing actually happening. Many
projects have been proposed on
both the countrys west and east
coasts but none have been offi-
cially sanctioned or federally ap-
proved.
More than 20 LNG projects are
proposed along British Columbias
Pacific coast for export to Asian
markets, while another four are
proposed in Nova Scotia targeting
markets in India and Europe.
BC LNG Alliance president
David Keane is optimistic that at
least two the proposed major
projects in British Columbia will
begin exporting by 2020, while
another three could come online
between 2021 and 2024.
Its not unrealistic to suppose
that we could see three large LNG
export projects on the west coast,
with probably one or two small
ones as well. The governments
working and were working hard
to reduce our costs both our fis-
cal competitiveness as well as the
cost of construction, says Keane.
One of the countrys biggest
hurdles is that the LNG industry
is still in its infancy, with all the
proposed projects being built from
the ground up.
In comparison, global competi-
tors such as Australia, East Africa
and the US are working with
brownfield operations.
Optimistic But Canada definitely
has some advantages.
Canada has a tremendous
amount going for it an enor-
mous supply base, supportive pro-
vincial and federal government, a
highly-educated workforce, and
its an OECD country.
Last but not least, because of
our colder climate we get a rough-
ly 25% increase in the production
capacity of our plants for the same
amount of investment in British
Columbia that you would get in
the US Gulf Coast, Australia or the
Middle East, says Keane.
The big buyers are going to be
looking to diversify their supply
portfolios they arent going to
want to buy all their gas from one
particular country.
British Columbias Minister of
Natural Gas Development, Rich
Proposal: the LNG Canada site model displayed in Kitimat, British Columbia
PrOPOSEd LNG PrOjECTS IN CANAdA
NOVA SCOTIA
Goldboro LNG
Proponent: Pieridae Energy
canada
Location: Guysborough
county
Bear Head LNG
Proponent: LnGL
Location: Port Hawkesbury,
cape Breton
AC LNG
Proponent: H-Energy
Location: Guysborough
county
LNG Nova Scotia
Proponent: Unknown
Location: TBd
BrITISH COLUMBIA
Aurora LNG
Proponent: nexen Energy,
Inpex, JGc
Location: digby Island
Cedar LNG
Proponent: cedar LnG
Export development (Golar
Coleman, is optimistic that those
advantages will make a big differ-
ence when filling global demand.
Not only does western Canada
boast cooler temperatures ideal for
LNG but it offers a long-term sup-
ply of gas from major plays such as
the Montney tight gas formation
and Duvernay shale.
My job has been to focus on
this opportunity for British Co-
lumbia to make sure were global-
ly competitive, to make sure we
get all of our work as government
done legislation, taxation, and
those things we are globally com-
petitive on, says Keane.
To date, the province has signed
focus lng
LnG, Haisla First nation)
Location: douglas channel
discovery LNG
Proponent: Quicksilver
Resources canada
Location: campbell River
douglas Channel Energy
Project
Proponents: altaGas and
Idemitsu Kosan, EdFT
Trading, and Exmar
Location: Kitimat (floating
facility)
Grassy Point LNG
Proponents: Woodside
Energy
Location: Grassy Point, north
of Prince Rupert
Kitimat LNG
Proponents: chevron canada
and Woodside Energy
Location: Kitimat
Kitsault Energy
Proponents: Kitsault Energy
Location: Kitsault
project development agreements
with the proposed Pacific North-
West LNG and LNG Canada
projects.
Long-term planning The big-
gest hurdle for proponents right
now is the rapidly declining price
of crude. It has forced many pro-
ponents to cut capital, potentially
delaying the pace at which LNG
projects are sanctioned.
In Nova Scotia, there has been a
shift in activity, said natural gas
engineering specialist for the
provinces Department of Energy,
Bill OHalloran. Many are waiting
for prices to rebound. In the
LNG Canada
Proponents: Shell canada,
Kogas, Mitsubishi, Petrochina
Location: Kitimat
NewTimes Energy
Proponents: newTimes
Energy
Location: Prince Rupert area
Nisgaa LNG
Proponents: nisgaa nation
Location: nasoga Gulf
Orca LNG
Proponents: Orca LnG
Location: Prince Rupert
Pacific NorthWest LNG
Proponents: Petronas, Japex,
PetroleumBrunei, Indian Oil,
Sinopec, Huadian
Location: Prince Rupert
Prince rupert LNG
Proponents: BG Group
Location: Prince Rupert
Steelhead LNG (Sarita LnG
and Malahat LnG)
Proponents: Steelhead LnG
Location: Vancouver Island
meantime, what they can do is
make sure theyve got all of the
pieces they need to proceed to
project sanction and move on, he
says.
On the flipside, British Colum-
bias projects are still moving
ahead.
The proponents of the Petro-
nas-led PNW LNG conditionally
sanctioned the C$36 billion
(US$25 billion) project in June
2015 pending federal approval,
and the C$40 billion Shell
Canada-led LNG Canada is wait-
ing on its federal environmental
approval before a final invest-
ment decision is made sometime
25
Photo: BLOOMBERG
Stewart Energy LNG
Proponents: canada Stewart
Energy Group
Location: near Stewart
Triton LNG Limited
Partnership
Proponents: altaGas and
Idemitsu
Location: TBd
WCC LNG
Proponents: ExxonMobil
canada and Imperial Oil
Location: Tuck Island, Prince
Rupert
Watson Island LNG
Proponents: Watson Island LnG
Location: Watson Island, near
Prince Rupert
WesPac LNG
Proponents: WesPac Midstream
Vancouver LLc
Location: delta
Woodfibre LNG
Proponents: Woodfibre LnG
Location: Squamish
this year. Every single one of our
members is working very hard to
get to a final investment decision.
Theyre reducing costs to the
extent they possibly can with con-
tractors and with the EPC
(engineering, procurement and
construction) companies, says
Keane.
These are projects that are go-
ing to be long-term they might
have an economic life of 25 years
but theyll have a physical life
well beyond that.
As long as the market and sup-
ply is there, theres no reason why
these plants wont continue to op-
erate.
26   
australia
Big hitter: Chevrons Gorgon project will supply 15.6 million tonnes per annum
Future projects hit the
wall of low LNG prices
There are nine trains and one FLNG vessel in the
works but the outlook beyond these is unclear
RusseLL seaRaNCke
Wellington
A
ustralia has nine liq-
uefied natural gas trains
and one giant floating
lNG vessel at various
stages of construction that, once
on line, will cement its position as
a global lNG powerhouse, but it is
difficult to know when the next
greenfield or brownfield lNG
project will occur.
Bechtel is building one train
each for the santos-led Gladstone
lNG project and ConocoPhillips
australia Pacific lNG (aPlNG),
and two for Chevrons Wheatstone
scheme, while the Kellogg Joint
Venture Group is building three
trains for Chevrons Gorgon
project, the JKC joint venture is
building two for inpexs ichthys,
and technip and samsung Heavy
industries are working on the
Prelude FlNG vessel for shell.
Gorgon will supply 15.6 million
tonnes per annum, Wheatstone
8.9 million tpa, ichthys 8.9 mil-
lion tpa and Prelude 3.6 million
tpa, while the new trains at Glad-
stone and aPlNG will add 3.9 mil-
lion tpa and 4.5 million tpa, re-
spectively.
By 2019 to 2020 there will be a
projected combined lNG export
volume of just over 76 million tpa,
according to the australian gas
industry.
However, cost overruns and
schedule delays have character-
ised the australian lNG boom.
already defined as the most ex-
   
pensive place on earth to build an
lNG project, the economics of lNG
in australia have been further im-
perilled by the low lNG price.
Watchers say that, even though
australia has several major green-
field lNG developments in the de-
sign and planning stages, it will be
surprising if any make meaningful
progress this year due to the com-
bined effects of the low price, over-
supply and cost challenges.
there is also no optimism about
brownfield expansions at the Dar-
win lNG and Pluto lNG locations.
Greenfield projects the pro-
posed greenfield projects are the
Woodside-led Browse scheme, the
ExxonMobil-led scarborough re-
source, PttEPs Cash-Maple project
and GDF suezs (now Engie) Bona-
parte development, all of which
were linked to FlNG concepts.
regarding Browse, Woodside
says in a January 2016 update that
work continues on a range of ac-
tivities related to the commer-
cialisation, timing and sequenc-
ing of FlNG development required
to support a final investment deci-
sion in the second half of 2016.
However, the majority of mar-
ket watchers do not believe Wood-
side and its joint venture partners
will sanction Browse this year
given all the commercial chal-
lenges.
there is even less optimism for
ExxonMobils scarborough devel-
focus
 
LNG
opment, with one market-watcher
labelling it dead in the water. Or
should that be dead under the
water?
as part of a retention lease re-
newal last November, the operator
and its joint venture partner BHP
Billiton pledged to the australian
government to spend a$250 mil-
lion ($174 million) in the next five
years on moving scarborough to-
ward a final investment decision.
PttEP applied the brakes at its
Cash-Maple development a couple
of years ago, and says it is con-
tinuing to work through concept
selection, with all commerciali-
sation options still under consid-
eration, including FlNG and
pipeline options.
a company spokesman says Pt-
tEP is focussed on concluding
this work prior to the retention
lease renewal in 2016.
the Bonaparte project has gone
into hibernation since Engie sur-
rendered on the FlNG concept
the capital costs of FlNG were
considered too high and the re-
serves not large enough.
it is understood that alternative
concepts are being studied, in-
cluding a near-shore lNG solution,
third-party supplies, or the do-
mestic gas market in australia.
Engie and co-owner santos are
said to have turned their focus
elsewhere in their portfolios.
Prior to the lNG price crash,
brownfield expansions at Darwin
 
Photo: CHEVrON
and Pluto had been seen as ration-
al next investments for australian
lNG. ConocoPhillips has for years
expressed its eagerness to build a
second train at Darwin, as has
Woodside at Pluto.
Finding the offshore feedstock
resource has been the main chal-
lenge for both companies, and
they have invested heavily in ex-
ploration and appraisal drilling
for reserves.
ConocoPhillips has had more
success than Woodside by finding
the Greater Poseidon and Caldita-
Barossa resources.
However, Poseidon is an enor-
mous distance from Darwin, even
farther than the ichthys fields,
presenting economic challenges.
Caldita-Barossa is much closer,
about 270 kilometres from Dar-
win, but the gas has a high carbon
dioxide content of between 12%
and 19%, making it costly to de-
velop.
it is understood ConocoPhillips
current thinking is to use either
Poseidon or Caldita-Barossa as
backfill for its existing lNG train
in Darwin.
the expansion of the Pluto plant
also hinges on finding gas that
can be developed at a reasonable
cost, which Woodside has failed to
do so far.
Woodside has other lNG
projects to pursue in its portfolio,
and is exploring in other coun-
tries.
29January2016
Bad time
for surge
in supply
The much-anticipated flood of
new Australian LNG supply is
under way thanks to three
recent project start-ups, but the
timing could not have been
worse for the producers, writes
Russell Searancke.
The LNG market is widely held
to be over-supplied due to lower
demand in Asia, which is
Australias primary customer.
In addition, the price of LNG is
linked to the price of oil, so the
producers are earning
substantially less revenue than
planned. LNG spot prices have
also hit a low level.
To illustrate the LNG price
devaluation, Woodside
Petroleum earned US$3 billion in
LNG revenue in 2015 compared to
US$4.5 billion in 2014, according
to its latest quarterly results.
Three projects have started
exporting cargoes in the past
year.
BGs Queensland Curtis LNG
project has started exporting
from two trains, Santos
Gladstone LNG has started
exports from the first of two
trains, and ConocoPhillips
Australia Pacific LNG has started
exports from one of two trains.
Two more trains are due on
line this year from Queensland
and, at full capacity, the three
projects will have combined
capacity of more than 25 million
tonnes per annum of LNG, says
the government.
The LNG is currently being
absorbed by buyers, according
to market observers, although
prices are not known.
There is some concern about
Sinopecs ability to handle its 7.6
million tpa of offtake from
Australia Pacific LNG, given its
lack of import capacity in China.
The challenge for all the LNG
producers was highlighted by
BG when it said last October
that it had already delivered
QCLNG cargos to 10 different
countries around the world.
So its a challenging
environment, but its an
environment in which were
working hard to maintain our
competitive advantage, says BG.
The flood of new Australian
LNG by no means ends there.
Four more groundbreaking
projects are due on stream by
2018 the 15.6 million tpa
Gorgon scheme, the 8.9 million
tpa Wheatstone project, the 3.6
million tpa project and the 8.9
million tpa Ichthys scheme.
each project has long-term
contracts with LNG buyers, but
the enormous profitability that
was expected two years ago will
be seriously undermined as long
as the current market
conditions are in place.
Cost over-
runs and
schedule
delays have
characterised
the Australian
LNG boom.
29 January 2016
russia
Novatek has
Yamal LNG
on track for
start-up
Russian gas independent reports that
LNG project in Siberia is on track with
$12.6 billion in financing so far and
construction of the first train at 56%
VLADIMIR AFANASIEV
Moscow
N ovatek chairman Leo-
nid Mikhelson has giv-
en Russian President
vladimir Putin an opti-
mistic update on the Yamal lique-
fied natural gas project headed up
by his company, the countrys
largest independent gas producer.
at a meeting in Moscow last
week after international oil prices
dropped to $30 per barrel, Mikhel-
son told Putin that Yamal LNG, on
the remote Yamal Peninsula in
West Siberia, has been success-
fully financed by its shareholders
which have now invested about
$12.6 billion.
according to Mikhelson, minor-
ity shareholders in the project
China National Petroleum Corpo-
ration and Frances total, each
holding 20% stakes paid $5 bil-
lion and $3.7 billion for Yamal LNG,
respectively.
Excess oil revenues the Rus-
sian government provided $2.3
billion of financing to the project
by purchasing Novateks bonds in
two instalments last year, with
money coming from the National
Welfare Fund created by Russia in
2008 to accumulate excess oil rev-
enues.
Mikhelson added that further
financing for Yamal LNG is expect-
ed within the next few weeks
after the ratification of amend-
ments to an agreement between
China and Russia in the Duma, the
lower house of parliament.
the amendments are required
in order for Novateks deal with
Chinas state-run Silk Road Fund
to sell its 9.9% shareholding in
Yamal LNG to become binding.
earlier in January, Novatek
revealed it had already received
the larger part of the 730 mil-
lion ($800 million) loan that Silk
Road extended to Novatek for a
period of 15 years to finance Yamal
LNG.
Following completion of the
deal, Novatek will hold a 50.1%
stake in Yamal LNG, which is
currently aiming to produce first
LNG by the end of 2017, despite the
worsening energy price environ-
ment.
However, in his meeting with
Putin, Mikhelson opted out of
providing an update on the com-
panys lengthy talks with Chinese
banks and asian and european
export credit agencies over
arranging project finance loans of
up to $12 billion to Yamal LNG.
these loans are essential for
Novatek to be able to cover esti-
mated investments of $27 billion
in the first train of the LNG plant
in the port of Sabetta and the
South tambeyskoye gas field.
over the past year, Mikhelson
has reiterated deadlines at the end
of June and later the end of
December for binding agreements
on Chinese financing to be signed.
Because of US and european
sanctions against Russia and
Novatek, introduced in 2014 in
response to the annexation of the
Crimean Peninsula from Ukraine,
the company cannot raise alterna-
tive long-term financing from
western banks.
Dismissing last years concerns
about a possible delay to the
project because of slow delivery of
modules for the LNG plant
from China, Mikhelson told Putin
that Yamal LNG will take delivery
of 72 modules via Sabetta this
year.
Mikhelson said the ports four
focus lng 27
Upbeat: Novatek
chief executive
Leonid Mikhelson
Photo: BLOOMBErG
berths are operating year-round
and accepting deliveries, despite
the difficult ice conditions that
usually last in the area for half a
year or more, while a dedicated
airport has already transferred
about 130,000 passengers since
being opened in February 2015.
the construction of the founda-
tion in the southern part of
Sabetta for the future LNG loading
jetties is under way, he added,
with Russian contractor tekhno-
promexport working on the
power plant for the project.
Mikhelson added that the engi-
neering, procurement and con-
struction contract for the plants Delivering innovative solutions through
first train has passed the 56% com-
pletion mark, against 44% report-
ed at the end of September last
leading-edge expertise globally
year. We deal with all aspects and phases of Our involvement at the earliest possible
liquefied natural gas (LNG) and floating phase of major projects liaising with
Ice-class carrier earlier in Jan- liquefied natural gas (FLNG) developments. potential stakeholders including
uary, South koreas Daewoo Ship- Our global LNG capabilities and governments, developers, lenders and
building & Marine engineering experience, when combined with in-house major gas field owners means we often
ports, shipping, power, environmental and influence investment decisions.
floated an arc 7 ice-class LNG car-
project management offerings, puts Mott Following project sanction we can design
rier for the Yamal LNG project, and engineer all aspects of LNG and FLNG
MacDonald in a unique position.
classed for breaking through two developments.
metres of ice. Our ports and coastal experts have
extensive experience in the planning,
the SCF Yamal was launched at design, procurement and construction
Daewoos okpo shipyard in Geoje supervision of marine facilities associated
and is the first of 15 LNG new- with LNG import and export terminals.
builds contracted to Daewoo to
serve Yamal LNG.
Russias Sovcomflot, Japans
oSk Lines, Greeces Dynagas and
Bermuda-registered teekay will
PIPELINES | ONSHORE AND OFFSHORE FACILITIES | REFINERY SERVICES
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the three-train LNG plant is ex- oilandgas@mottmac.com
pected to produce 16.5 million www.mottmac.com/oilandgas
tonnes per annum of LNG once it
reaches full capacity.
28   
africa
Mozambiques time is now
Final investment decisions from Anadarko and Eni on their
liquefaction projects should herald the arrival of the
country as a global LNG player
IAIN ESAU
London
MOZAMBIQUE has supplanted
Nigeria as the go-to place for lique-
fied natural gas export projects in
Sub-Saharan Africa on the back of
huge offshore gas discoveries made
by Eni and Anadarko Petroleum.
Nigeria was the regions origi-
nal liquefaction heartland when
Nigeria LNGs Bonny Island com-
plex in the Delta began producing
in the late 1990s, the first such fa-
cility in sub-Saharan Africa.
That plant subsequently ex-
panded to six trains but proposals
for a seventh train have been on
hold for years now due to the
quagmire that is Nigerian politics,
fiscal issues and militancy in the
Delta.
In the early years of this cen-
tury, multiple LNG projects were
touted for the Niger Delta, but the
likes of Brass and certainly Ola-
kola have drifted into investment
backwaters despite hints of a pos-
sible revival at Brass.
But in 2010, industrys attention
had already begun to shift from
West Africa to East Africa after
Anadarko made its ground-break-
ing Windjammer gas discovery in
Area 1 off northern Mozambique.
That huge discovery triggered a
multi-year exploration effort by
  
the US player and Eni, operator of
adjacent Area 4. The Rovuma
basin was transformed into one of
the worlds biggest gas plays,
which the government now reck-
ons holds about 200 trillion cubic
feet of resources.
Transformation Assuming gas
prices hold up, the two companies
are closing in on taking final in-
vestment decisions on two major
liquefaction schemes, one onshore
and the other offshore.
Anadarko awarded a joint ven-
ture of CB&I, Chiyoda and Saipem
a turnkey contract to build its two
onshore trains at Afungi in May
last year, since when the trio have
been treading water.
On Enis Coral South FLNG
scheme, Upstream understands
that a consortium of Technip, JGC
and Samsung Heavy Industries is
frontrunner for this order, which
is expected to be worth about $5.3
billion.
This project duo is set to herald
the eventual transformation of
Mozambique into a global LNG
player on a par with the likes of
Qatar and Australia.
In a report published this
month, the International Mone-
focus
  
LNG
tary Fund forecast that Mozam-
biques annual LNG output will
reach 89 million tonnes in 2028,
comprising more than 50% of the
countrys gross domestic product
at that time.
Furthermore, the IMF predicts
that by 2045, total government
revenues from LNG projects will
have reached about $500 billion.
The IMF assumes that construc-
tion work on Anadarkos initial
two, 5.5 million tonnes per an-
num onshore trains at Afungi and
Enis 3 million tpa Coral floating
LNG project will start in the sec-
ond half of this year, with first
cargos from both being exported
in 2021.
In its latest staff report, the
fund expects these facilities to be
the precursors to no less than 11
additional onshore LNG trains and
three more FLNG units, all due on
line by 2028.
Total investment in Mozam-
biques LNG sector from this year
to 2028 is projected to be about
$110 billion.
Due to cost-recovery mecha-
nisms, LNG revenues will not
start accruing to Mozambiques
government until the mid-2020s.
However, in the next few
 
years the International Mone-
tary Fund (IMF) expects addi-
tional capital gain taxes associ-
ated with transactions involving
transfers of ownership stakes in
large natural resource projects
might occur.
This statement while applica-
ble to coal and mineral assets
also supports market suggestions
that Eni may reduce its stake in
Area 4 and Anadarko could reduce
or sell its stake in Area 1.
It is unclear when Anadarko
Petroleum and Eni will make final
investment decisions on their two
liquefaction projects in Mozam-
bique.
Crucial decisions These have
been delayed as the two propo-
nents have awaited clarity on
legislation, completion of nego-
tiations on the terms and condi-
tions of their exploration, pro-
duction and concession contracts
for Areas 1 and 4, plus unitisation
of the Mamba-Prosperidade gas
field which straddles the two
licences.
The IMF says it is crucial that
jointly satisfactory agreements
are reached soon to ensure that
LNG investment can move for-
29January2016
ward, pointing out that ensur-
ing LNG production materialises
remains important to underpin
Mozambiques long-run debt sus-
tainability.
It predicts that, all being well,
final investment decisions for
Coral FLNG and Afungi onshore
will be taken about mid-2016.
Anadarko is in the final stages
of EPCC negotiations, says the
IMF, based on preliminary agree-
ment on how state oil company
ENH can pay its share of project
funds, on the amount of gas
reserved for domestic use and on
the structure of marketing
activities.
A unitisation agreement cover-
ing Mamba-Prosperidade has also
been reached.
In neighbouring Tanzania,
groups led by BG and Statoil have
plans to construct a three-train
onshore LNG facility with a to-
tal capacity of 15 million tpa at
Lindi.
The schedule for this proposed
plant has fallen behind that of
Mozambique, hampered by elec-
tions, land acquisition and fiscal
issues, capacity constraints in
government, and BGs ongoing ac-
quisition by Shell.
29 January 2016
focus LNG 29

New horizon:
Perenco and Ophir go
fishing boats
in the
Mozambican
for FLNG solutions
capital, Two independents are entering the Sub-Saharan Africas liquefied
Maputo natural gas arena in Equatorial Guinea and Cameroon, writes Iain
Esau.
Both Paris-based Perenco and ophir Energy will use novel
floating LNG technology from GolarLNG to tap small gas deposits
that would likely have been otherwise uneconomic.
Perenco will deploy a 1.2 million tonnes per annum unit to tap
less than 1 trillion cubic feet of gas off Cameroon, while ophir aims
to use a 2.2 million tpa unit off Equatorial Guinea and could deploy a
second vessel in the coming years.
Golars technical solution could be an economic game changer for
exploiting small fields, particularly in benign environments such
as the Gulf of Guinea.
Also in Cameroon, privately-owned NewAge is assessing the
possibility of using a barge-based LNG solution on its Etinde acreage
if it can establish sufficient resource base.
Engie formerly GDF Suez is after many years still studying
the possibility of constructing an onshore train near Kribi.
Meanwhile, in Congo-Brazzaville, Eni appears to be evaluating a
barge-based liquefaction plant to exploit a few trillion cubic feet of
shallow water gas resources in Marine XII.
The Italian major is cagey about discussing this project but its
partner, NewAge, is less reticent, with a recent presentation
highlighting a simple FLNG solution in graphic form.
off Mauritania, Dallas-based Kosmos Energy has a 15 Tcf deep-
water discovery on its hands with the most viable development
solution being based on LNG.
However, the find also extends into Senegalese waters and could
be complicated by the need for bi-lateral government
negotiations.
The two countries are also likely to press their cases to host an
onshore LNG plant so perhaps the simplest solution would be an
FLNG vessel.
Plans by Shell for a mini-FLNG vessel in Gabon have amounted to
little, as have proposals for an FLNG unit to tap some deepwater gas
finds off northern Mauritania.
In Angola, a Chevron-led consortium finally brought online a 5.2
million tpa, single-train plant in Soyo in 2013.
Photo: However, smiles soon turned to grimaces when the facility was
REUTERS/ partly destroyed by fire. Major concerns abide, but the facility is
SCANPIX now in the process of being recommissioned.

1618 March, scow

Organised by: Supported by:

LNG projects presented at the Congress:

+44 207 394 30 90 (London), +7 (499) 505 1 505 (scow)

www.lngrussiacongress.com
events@vostockcapital.com

Sponsors:
Special partner:
30   
india
Emblem: the Indian national flag near the India Gate in in New Delhi
Demand still strong in India
Countrys regasification capacity set to more than
double to 45 million tonnes per annum by 2020
NIShaNt UGal
New Delhi
I ndias appetite for liquefied
natural gas remains robust,
led by the weakening in glo-
bal LnG prices and strong de-
mand from core consumers such as
the power and fertiliser industries.
The nations regasification ca-
pacity is expected to more than
double to at least 45 million tonnes
per annum by 2020, as key LnG
players embark on an expansion
drive, in the hopes of higher de-
mand for the imported gas.
LnG last year accounted for al-
most 40% of indias gas supply,
which stood at about 117 million
cubic metres per day.
However, actual gas demand
was much higher at more than 400
MMcmd, according to the Ministry
of Petroleum & natural Gas.
While indias gas demand was
believed to be more than three
   
times the actual supply, demand
for imported LnG remains fairly
price-sensitive, industry experts
suggest.
Over the past year, spot LnG
prices have more than halved to
between $7 and $8 per million Brit-
ish thermal units, leading to a fa-
vourable environment for the LnG
sector in the country.
Spot prices Experts suggest that
spot LnG prices are expected to
soften further, which could help to
ramp up demand for imported gas
in the country.
significant additions to global
LnG liquefaction capacity over the
next few years are expected to pro-
vide opportunities for favourable
negotiations as well as renegotia-
tions of long-term contracts, and
will also keep spot LnG prices low-
focus
 
LNG
er for longer, claims a recent re-
port by broker Kotak institutional
Equities. india and Qatar have re-
cently renegotiated their long-
term LnG contract, which is likely
to improve the fundamentals for
LnG players in india, experts
believe.
The countrys largest LnG player,
Petronet, stands to benefit most
from the reworked deal, as the
company has a 7.5 million tpa long-
term contract with Qatars RasGas
for a 25-year period.
starting this year, Petronet is
sourcing Qatari LnG at about $6.5
per million Btu, which is half the
price of what it paid last year to
RasGas for gas imports.
The favourable amendment of
the long-term contract between
Petronet LnG and RasGas removes
a key overhang on gas sector
 
companies, the Kotak report adds.
The fertiliser sector has been at the
forefront of LnG activity, as the
power sector historically had sel-
dom been able to afford to burn
costly imported LnG that earlier
cost more than $14 per million Btu.
However, a recent policy inter-
vention led by Prime Minister
narendra Modi to revive stranded
gas-based power plants, coupled
with lower global LnG prices, is
likely to increase acceptability of
the imported gas for the power sec-
tor, experts say.
Government policy initial re-
ports suggest that the new govern-
ment policy is generating an over-
whelming response from the
power sector, which could further
boost LnG demand.
indias domestic gas production
29January2016
Photo: aFP/SCanPiX
remains flat, while output from
Reliance industries Block KG-d6
continues to decline due to reser-
voir issues. analysts believe that
lower than expected domestic gas
production is likely to further in-
crease indias LnG appetite across
various sectors.
Higher LnG demand is also ex-
pected from city gas distribution
and other industrial sectors, say
sources.
The majority of indias existing
and upcoming LnG regasification
facilities are located off the west
coast, which has a reasonable pipe-
line infrastructure.
However, limited pipeline
connectivity on the east coast
and other parts of the country
remains one of the biggest
challenges for the expansion of the
LnG market in india.
29 January 2016
focus LNG 31

china

Effects of the economic

slowdown felt in sector
Demand for LNG
declined in 2015
after several
years of growth,
with industry
officials painting
gloomy picture Together with
for current year Kentz, we offer
Xu Yihe
Singapore
Proven
LNG
C hinas slowdown in eco-
nomic development has
affected demand for liq-
uefied natural gas, which
saw its first decline in 2015 after
years of double-digit growth.
The country last year witnessed
Capabilities

LnG demand drop by almost 2%,

snclavalin.com
according to consultants Wood
Mackenzie.
China had signed contracts
with overseas suppliers to import
38 million tonnes of LnG last year,
but through the first 11 months
the country only imported 17.5
million tonnes, in part due to lack
of demand. The majority of the
imports came from australia and
Qatar.
Chinese industry officials paint
a gloomy demand scenario for
2016, saying the bearish trend will
continue for a few more years
before a new stimulus package
from the government might boost
the economy.
The supply overhang last year
prompted China national Offshore
Oil Corporation (CnOOC) to offer
for sale in the asia market some of
the LnG it had committed to buy
from australia.
To cope with the glut in
supply, sources say that Chinese
national oil companies will this
year likely negotiate with term
suppliers to reduce their import
volumes.

Short-term effect however, in-

dustry officials say the waning
demand for LnG imports is a just
a short-term dip rather than a
long-lasting trend.
in the long run, LnG imports to
China are expected to increase to
60 million tonnes per annum by
2025, according to a government
forecast. Pluto LNG,
China has been trying to pro- image courtesy of Woodside
mote LnG consumption to replace
coal and has built 12 LnG termi-
nals to accommodate importa-
tion. These terminals have
combined regasification capacity
of 40 million tpa.
sources say some of CnOOCs Cargo: and LNG carrier at Chinas second LNG terminal in Fujian province Photo: Fujian
new LnG terminals are being
forced to delay operations as weak flood the market in the year gling with the sale of their term Beijing-based industry officials
demand does not justify the op- ahead. cargoes against cheap spot car- say that smaller plants with a to-
erational start-up now. sources say some term buyers goes. tal gasification capacity gauged at
industry officials in China in China already reviewed their Most of Chinas term cargoes 76 million cubic metres per day
have warned LnG project develop- prices last year in line with the are locked in take-or-pay con- will see their unit utilisation rate
ers to watch their margins for fall of the crude price and to com- tracts priced above $10 per million continue to drop to well below 50%
their contracted term imports pete with the spot cargoes. British thermal units, a sharp in 2016. Last year, these plants
from asia and Europe, as more Chinese LnG project developers contrast to the current spot price supplied only about 9.6 million
and more cheap spot cargoes will led by CnOOC are already strug- of less than $7 per million Btu. tonnes of LnG.
32      
focus
  
LNG   29January2016

south-east asia

Nations face change as domes

Key South-East Asian producers Indonesia, Malaysia and Brunei
work to boost output with multiple projects in the offing
AMAndA BAttErsBy
singapore

SOUTH-East Asia is home to three
of the worlds key liquefied natural
gas producers Indonesia, Ma-
laysia and Brunei Darussalam.
In 2014, Malaysia was the
worlds number two LNG exporter,
with exports hitting an all-time
high of 25.1 million tonnes per an-
num. Work is already under way
to add a ninth train at the Petro-
nas LNG Complex in Bintulu,
Sarawak.
Japans JGC Corporation is car-
rying out the $500 million engi-
neering, procurement, construc-
tion and commissioning contract
for the 3.6 million tpa Train 9.
A joint venture of Saipem and
Chiyoda performed the front-end
engineering and design work for
the latest train, which will boost
output at the liquefaction complex
to a nameplate capacity of 29.3
million tpa.
JGC is also undertaking rejuve-
nation work on trains 4, 4 and 6 at
the complex, which comprises the
Malaysia LNG Satu, Dua and Tiga
facilities.
While Malaysia is boosting its
onshore liquefaction capacity, na-
tional oil company Petronas also
has two landmark domestic float-
ing LNG projects under construc-
tion.
PFLNG1, which was constructed
by Daewoo Shipbuilding & Marine
Engineering, is on track for start-
up this year. The 1.2 million tpa
floater will be deployed on the
Kanowit field off Sarawak.
Meanwhile, PFLNG2, which is
being built at compatriot Sam-
sung Heavy Industries yard, is
destined for the Rotan field off
Sabah. This vessel, with a produc-
tion capacity of 1.5 million tpa of
LNG, is expected to be commis-
sioned in 2018.
Malaysia is also an importer of
LNG via the 3.8 million tpa Melaka
terminal and another such facility
is under construction at Johor.
Construction of the 5 million tpa
Johor terminal is expected to be
completed by April 2018.
Exports down Indonesia, once
the worlds number one LNG ex-
porter, has lost some of its lustre
in the global marketplace, with
exports in 2014 down 1 million
tonnes on the previous year.
The slide was due in part to
shortages in feedstock gas at the

Low costs boost reputation of Papua New Guinea

THE growth of Papua New Guineas LNG
industry is set to continue, with at least
two new trains planned to be built in the
coming years, writes Russell Searancke.
An ExxonMobil-led joint venture
aspires to building a third train at the
renowned PNG LNG project, while the
Total-led owners of the proposed Papua
LNG project will construct one or two
trains.
Currently, there are two trains
producing in PNG both at the PNG LNG
project which in the quarter ending on
31 December 2015 exported 7.6 million
tonnes per annum, far in excess of the
nameplate capacity of 6.9 million tpa.
The size of the third train is still to be
determined, and current activities are
focused on drilling one and possibly two
appraisal wells on the Pnyang field,
which will be the feedstock source for
train three. A final investment decision
on Train 3 is provisionally planned for
late 2017, according to co-owner Oil
Search.
Project owners are operator
ExxonMobil on 33.2%, Oil Search on 29%,
national oil company Kumul Petroleum
on 16.6%, Santos on 13.5%, JX Nippon Oil
& Gas on 4.7%, PNGs Mineral Resources
Development Company on 2.8% and
PNGs Petromin on 0.2%.
The Total-led owners of the Papua LNG
project are also absorbed in appraisal
drilling at the Elk-Antelope field
complex.
The joint venture comprises Total on
40.1%, InterOil on 36.5%, Oil Search on
22.8% and minority interests on 0.5%,
although these stakes will dilute after
the PNG governments 22.5% back-in.
Oil Search says the Elk-Antelope
resource is large enough to support at
least one train of 5 million tpa capacity,
while InterOil believes the resource will
underpin two trains.
Total will decide this year about train
dimensions as part of finalising its
development concept, and is currently in
the basis of design phase with front-end
engineering and design to follow.
The optimistic attitude about PNGs
potential for continued LNG investment
is not limited to the LNG proponents and
the government.
PNG Prime Minister Peter ONeill
recently pointed to analysis by Facts
Global Energy that said there will be four
or five trains operating in PNG by
mid-2022, and potentially six or seven
trains by 2030.
Wood MacKenzie, meanwhile, has
identified PNG as having the lowest
project break-even costs in the region.
The third train at PNG LNG has an
estimated break-even price of about $7.50
per million British thermal units, while
Papua LNG is a little higher, according to
Wood MacKenzie.
Both are superior to East Africa and the
US Gulf Coast, and a cut above Canada
and Australia.
Oil Search says there are several
reasons behind the PNG advantage
conventional LNG projects with no new
technology utilised in development,
substantial reserves base with high
heating value, suitable for Asian
reticulation networks, high liquids that
enhance economics, close proximity to
Asian LNG markets, a stable fiscal regime
with strong government suppor, and
aligned joint ventures with highly-
respected operators.
It is no wonder that PNGs growth
potential as an LNG destination has
made both Oil Search and InterOil
prospective takeover targets.
 29 January 2016
stic use rises
Bontang LNG plant, while more
gas volumes are now being com-
mitted to the domestic market to
meet growing demand.
The former Arun liquefaction
project in Nanggroe Aceh Darus-
salam has been converted into a
land-based LNG receiving and re-
gas facility.
Indonesia currently has two
LNG floating storage and regasifi-
cation units and at least two more
are planned by 2019.
Indonesian upstream regulator
SKK Migas has earmarked 39% of
this years gas production for ex-
port, with the lions share intend-
ed for domestic use.
The trend for domestic absorp-
tion is increasing. However, not
all gas that has been produced is
absorbed. Our LNG absorption is
only 4%, partly because domestic
infrastructure cannot support de-
liveries, says SKK Migas chief
Amien Sunaryadi.
Expansion BP has deferred to un-
til at least this year the final in-
vestment decision on its proposed
multi-billion dollar expansion of
the Tangguh liquefaction project
in West Papua, Indonesia.
This expansion includes adding
a third 3.8 million tpa train that
would boost capacity to 11.4 mil-
lion tpa.
Some of the Tangguh volumes
are already committed to the do-
mestic market and the partners
On track:
PFLNG1, seen
here under
construction
last year, is
nearing
start-up
Photo:
PETRONAS
have agreed to commit more of
the proposed future trains pro-
duction in the same direction, al-
though the take-up to date has not
been as high as originally expect-
ed.
Indonesia is also home to the
2 million tpa Donggi Senoro
project onshore Sulawesi, which
last August shipped its first cargo.
In 2014, Brunei also saw its LNG
exports dip, down by 800,000
tonnes to 6.2 million tonnes on
the back of lower contracted vol-
umes, according to the Interna-
tional Gas Union.
The country has been hit by a
lack of recent exploration success
that translates into insufficient
new gas reserves to currently un-
derpin a new train at the Brunei
LNG (BLNG) facility, which has ca-
pacity of more than 7.2 million tpa
from its existing five trains.
However, the project has em-
barked on a major rejuvenation
investment that is intended to
sustain reliable LNG production
beyond 2033.
BLNG is also carrying out an en-
ergy efficiency programme, in-
cluding phased co-generation
projects, that is due to run
through 2016 and will free up
300,000 tpa of LNG and reduce car-
bon dioxide emissions by 1.3 mil-
lion tpa.
BLNG is a joint venture between
the government of Brunei, Shell
and Mitsubishi.
focus LNG
Japan turning to nuclear power
and renewables to reduce need
JAPAN is still the worlds largest
importer of liquefied natural gas
although the nations imports
are expected to decrease by 6.4%
year-on-year in the 2016-2017
fiscal year as more nuclear
reactors are brought back into
operation, writes Amanda
Battersby.
Japans Institute of Energy
Economics reckons that LNG
imports in the current financial
year, which ends on 31 March,
will already be more than 4%
down on last years levels.
The nation is also increasing
its use of other renewable
energy sources such as solar and
hydropower for power
generation that will contribute
to the falling demand for
imported LNG.
Japans LNG demand is
forecast to be 77 million tonnes
in 2020, down from the record
86 million tonnes of 2014,
according to Platts analytical
unit, Eclipse Energy.
Japanese customers are also
reviewing the way in which
Photo Courtesy of Freeport LNG Development, L.P.
33
it purchases under long-term
contracts, which currently
largest lNg account for about 80% of its
importer imports.
More than 10 million tpa of
the joint ventures LNG
Jera Company eyes end volumes are on long-term
contracts that are due to expire
to long-term contracts around 2020 and these will not
necessarily be renewed,
they secure LNG in future according to president Yuji
against the backdrop of Asian Kakimi.
spot prices falling by more than Looking ahead, Jera will only
50% in the past two years. contract sufficient LNG on
Japans Jera Company is set to long-term contracts to cover its
this year become the worlds minimum requirements based
largest buyer of LNG, overtaking on expected scenarios of Japan
South Koreas Kogas. restarting more nuclear
Jera, the 50:50 joint venture capability and increasing its use
between Tokyo Electric of renewable energy.
Power Company and Chubu Last year, Jera signed
Electric Power Company memoranda of understanding
formed last year, agreed in with Singapores Pavilion Gas
December to bring under one and the Electricity Generating
umbrella their existing LNG Authority of Thailand, under
contracts, which account for which the companies will look
almost a combined 40 million for collaboration opportunities
tonnes. on LNG operations, including
However, Jera plans to cut the possible joint procurement
back on the amount of LNG that of LNG.
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in the LNG industry. Contact CB&I to learn
how our complete solutions can benefit your
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34       
focus
 
LNG   29January2016

Egypt in middle east & north africa

play with
Zohr find
a yEaR ago there was a deep sense
of despair in Egypt about finding
enough gas supplies to meet
increasing domestic energy needs
at a time when international oil
companies baulked at investment
in a country grappling with finan-
cial problems, writes Nassir
Shirkhani.
Then in august, italys Eni
announced the discovery of the
giant deep-water Zohr field in the
Mediterranean Sea.
Zohr, with recoverable reserves
of 22 trillion cubic feet, dramati-
cally changed the dynamics of the
gas industry in the eastern Medi-
terranean, opening the way to gas
imports for resale from neigh-
bouring israel and Cyprus and
acting as a catalyst for renewed
exploration efforts by internation-
al oil companies.
Eni is now fast-tracking the
development of Zohr, which is
expected to supply 2.7 billion
cubic feet per day of gas in 2019.
Other deep-water develop-
ments, led by BP, are scheduled to
add a further 1.2 Bcfd before the
end of the decade, thus enabling
Egypt to stop imports of liquefied
natural gas.
The Zohr discovery has prompt-
ed both regional governments and
private companies in the eastern
Mediterranean to turn their focus
to Lng plants in Egypt, which Leading light: LNG vessels at Ras Laffan port in Qatar Photo: QatarGas
were forced to close following the
2011 revolution as the government

Qatar determined to
diverted supplies to the domestic
market.
The Bg group-led idku Lng
facilities, and the Damietta plant
led by Eni and its Spanish partner
Union Fenosa, are naturally ideal

defend its LNG crown

destinations for the significant
gas discoveries made off israel and
Cyprus in recent years.
With international oil compa-
nies unwilling to pour billions of
dollars into building new Lng
facilities at a time of weak gas
prices, the Egyptian plants offer Worlds largest exporter forced to renegotiate long-term
the most cost-effective solution to
monetising the israeli and contracts as it seeks to outmanouevre Australian and US rivals
Cypriot gas, while helping Egypt
to once again earn revenues from NASSiR SHiRkHANi
its idle Lng plants. London
Last month, israel gave the go-

ahead to allow gas exports to
Egypt.
israel will be able to initially
sell 5 billion cubic meters (176.5
billion cubic feet) of gas to Egypt
over three years from the Tamar
site off its Mediterranean coast.
US player noble Energy and its
israeli partner Delek group have
signed four separate letters of in-
tent to export gas from the Tamar
and the Leviathan offshore fields
to Egypt.
They include potential sales to
the Egyptian Lng plants.
However, the status of gas ex-
ports to Egypt is uncertain after
Egypt froze talks on potential
deals last month.
Egypt was angered at the award
by an international arbitration
panel of $1.8 billion to the israel
Electric Corporation for damages
from the cut-off of Egyptian gas
supplies following the revolution.
at the same time, Cyprus has
just approved the purchase by Bg
of a major stake in noble Energys
aphrodite gas discovery off the
islands south coast.
H
aving established it-
self as the worlds larg-
est liquefied natural
gas exporter in the
past decade, Qatar is now solely
focused on defending its market
share and securing new clients.
an oversupplied market means
it is not prepared to defend its
crown by ending a 2005 ban that
firmly slammed the brakes on any
further development of the super-
giant north Field.
Qatar is instead being forced to
renegotiate once-lucrative long-
term contracts and resort to trad-
ing houses to sell spot cargoes in
its quest to fend off australian and
US rivals.
The tiny state, which produces
77 million tonnes per annum of
Lng, has a distinctive edge over
competition because of the inte-
grated nature of its gas export
projects and low production costs.
Control over the upstream
segment, liquefaction trains,
transportation, ports and import
terminals, enable Qatar to quickly
redirect cargoes between conti-
nents to take advantage of better
prices.
For example, Qatar moved fast
to switch tankers from Europe to
asia, where Lng rates jumped in
2011 after Japan closed down its
nuclear power stations following
the Fukushima disaster.
it has also established a pres-
ence in the emerging rival US
market to take advantage of op-
portunities there.
Qatar has a 70% stake in golden
Pass Products, a venture with
ExxonMobil that is seeking regu-
latory approval to export from
Texas.
The US supermajor is Qatars
main partner in the production
and marketing of Lng from the
north Field.
Falling gas prices have piled pres-
sure on Qatar to revise long-term
Lng contracts linked to oil prices.
Petronet Lng, indias biggest gas
importer, signed a revised contract
in December with Rasgas to im-
port gas at a significantly lower
price. The new formula between
the two companies is... a win-win.
Where the previous contract
meant that Petronet had to buy
Lng from Rasgas at $12 to $13 per
million British thermal units, the
new contract means a price of $6 to
$7 per million Btu, indias Petro-
leum Minister Dharmendra Prad-
han said at the signing.
Petronets revised terms amount
to a $1.1 billion transfer of value
from seller to buyer, Credit Suisse
estimated in a separate note.
Hagling for terms Qatars
main Lng customers, such as Jap-
anese and South Korean power
generation companies, are now
haggling for better terms follow-
ing Petronets revision.
With mounting pressure to
offer better terms to its long-term
customers, Qatar has moved to
compensate for falling revenues
by stepping up spot cargoes and
adding new regional buyers.
in a break from the past, it is
now using trading houses such as
Trafigura to sell to new markets
like Egypt and Jordan.
Trading houses allow Qatars
Lng producers Rasgas and Qatar-
gas to sell into each others mar-
kets.
They also enable Qatar to supply
clients in politically sensitive
countries such as Egypt, where
relations have soured with Qatar
in recent years.
Qatars spot sales have benefited
from proximity to new markets
such as neighbouring Dubai and
Kuwait.
The Qataris are also now poach-
ing regional customers from
rivals through incentives.
This was the case in January
with Pakistan, which backed out of
a nearly $1 billion deal with Shell.
Pakistan was to buy 60 Lng car-
goes from the supermajor after
Shell submitted the lowest price
in a tender finalised late last year.
Before officially awarding the
cargoes, Pakistani officials man-
aged to clinch a more favourable
deal with Qatargas.
47075.22_29LNG_Upstream_Full_Feb.indd 1 22/01/2016 12:25
36      
focus
  
LNG   29January2016

FLNG

Despite price
collapse,
projects
are ready
to roll

Three huge vessels are now under construction in South Korea, while
Coral, Browse, Scarborough and Abadi are waiting in the wings
RuSSell SeARAnCke
Wellington

The large-scale floating liquefied
natural gas segment has been hit
by the collapse in the LNG price
and market over-supply but, once
conditions improve, there are a
number of new projects ready to
proceed.
Three large FLNG vessels are cur-
rently under construction in South
Korea Shells Prelude, Petronas
FLNG1 and Petronas FLNG2.
Prelude should be operational in
Australia in 2017, Petronas FLNG1
is on schedule for start up this year
at the Kanowit field off Bintulu,
while Petronas FLNG2 is aiming for
2018 at the Rotan field off Sabah.
Prelude will be capable of process-
ing 3.6 million tonnes per annum
of LNG, 1.3 million tpa of conden-
sate and 400,000 tpa of liquefied
petroleum gas.
Petronas FLNG1 will have LNG
capacity of 1.2 million tpa, while
FLNG2 is designed for 1.5 million
tpa.
The next crop of large-scale
projects are enis Coral FLNG in
Mozambique, Woodsides Browse
in Australia, exxonMobils Scar-
borough in Australia and Inpexs
Abadi in Indonesia. eni and Wood-
side have stated their objectives for
Coral and Browse, but whether
they meet those goals remains to
be seen.
eni had targeted a final invest-
ment decision for Coral last year,
and production start-up at the end
of 2019. however, the Italian major

Operators eyeing smaller-scale developments

AS large floating liquefied natural gas de-
velopments in Australia and South-east
Asia start to take shape, operators and tech-
nology suppliers are also looking at smaller-
scale FLNG projects in a wide range of mar-
kets, writes Beate Schjolberg.
Players such as Golar LNG, excelerate and
hoegh LNG are all pursuing smaller float-
ing LNG projects, and though energy mar-
ket prices make the outlook uncertain, they
are confident that the market for FLNG
projects will grow in the years ahead.
While only a few contracts have yet been
signed, the companies point to more than
20 potential projects in West Africa, Latin
America, North America and the eastern
Mediterranean, and to a lesser degree in
east Africa and Asia.
The prospects comprise both stranded
gas fields, liquefaction of gas from onshore
fields for export, and projects to reduce gas
flaring. Oslo-based Golar last year secured
two contracts for its GoFLNG concept, in
Cameroon and equatorial Guinea, and is
chasing a project for a third FLNG conver-
sion with possible delivery in 2018.
The Cameroon agreement with state-
owned SNh and Perenco, Africas first of its
kind, was approved in September and is
scheduled for start-up in the second quarter
of 2017.
The Golar hilli FLNG vessel will tap the
near-shore Kribi fields, producing at a rate
of 1.2 million tonnes per annum of LNG for
about eight years.
In equatorial Guinea, Golar LNG last year
signed a preliminary 20-year tolling agree-
ment with Ophir energy and GePetrol for
use of the Gandria vessel at the Fortuna
project in the deep-water Block R from the
first half of 2019.
A final investment decision is planned for
the middle of this year. At full production,
Gandria will have a capacity of 2.2 million
tpa of LNG. Keppel Shipyard in Singapore
will carry out the conversion of all three of
Golars FLNG units.
hoegh LNG has so far focused on North
America, where it hopes to land two
projects currently under planning.
Rather than going for production from
offshore fields, hoegh LNG is concentrating
on barge-based solutions that are moored
quayside or close to shore.
In the US, the Delfin LNG project is on
track to become the first FLNG development
in the country, located at a deep-water port
facility 80 kilometres off Louisiana to
liquefy gas from the Delfin Offshore Pipe-
line.
hoegh LNG signed a front-end-engineer-
ing and design contract with Bechtel for
Delfin last year, and expects a final invest-
ment decision later this year. The Nor-
wegian company has also teamed up with
Bechtel for pre-FeeD work for operator
Steelhead LNG at the Canadian Malahat
project on Vancouver Island, which would
liquefy and export gas from onshore fields
in British Columbia.
Located on Malahat First Nation land, the
6.6 million tpa project has to undergo envi-
ronmental assessments and other reviews
before a final investment decision can be
made, currently planned for mid-2017.
excelerate energy is also actively pursu-
ing FLNG opportunities with its floating
liquefaction, storage and offloading solu-
tion, named FLSO.
The vessel is designed to be used both as
an offshore production vessel and as an
alternative to onshore facilities, with ca-
pacity ranging from 1 million to 4 million
tpa of LNG.
29 January 2016
has not yet awarded an engineer-
ing procurement and construction
contract for the Flng vessel, al-
though it has a preferred supplier
in the Reef consortium comprising
technip, JgC Corporation and
Samsung Heavy industries.
the Coral Flng vessel is expect-
ed to have a liquefaction capacity
of about 2.5 million tpa, and could
be as high as 3 million tpa.
Woodside, meanwhile, is target-
ing a final investment decision in
the second half of this year for
Browse, but there is a majority
view in the market that the opera-
tor and its joint venture partners
will not sanction this year, given
all the commercial challenges.
the Browse concept involves
three Flng vessels designed to
produce between 3.5 million tpa
and 4 million tpa and based on the
same design as Shells Prelude ves-
sel.
ExxonMobils Scarborough
The FLNG concept for Scarborough
is colossal one vessel with
processing capacity of between 6
million tpa and 7 million tpa.
Leviathan: Shells Prelude
should be operational in
2017
Photo: SHELL
project picked up some momen-
tum a couple of years ago, but is
now on hold awaiting an improve-
ment in economic conditions.
the Flng concept for Scarbor-
ough is colossal one vessel with
processing capacity of between
6 million tpa and 7 million tpa.
the recent renewal of the Scar-
borough retention lease indicated
government acceptance of a final
investment decision in late 2020.
inpexs abadi project in indone-
sia has also been put back while
the company and joint venture
partner Shell negotiate with the
indonesian government on most
aspects of the development.
last September, inpex con-
firmed its intent to dramatically
upsize the Flng vessel from 2.5
million tpa to 7.5 million tpa.
a revised plan of development
was submitted, but inpex has not
provided any project schedule up-
dates.
focus LNG
Floating LNG offers the greatest
opportunities to the industry
Floating lng is seen as one of
the greatest opportunities for the
lng industry going forward, as
its can offer decreased costs and
more flexibility than land-based
liquefaction, according to DnV
gl.
Samsung Heavy industries and
Daewoo Shipbuilding & Marine
Engineering are constructing
three newbuild Flng units for
Shell and Petronas, with the
South Korean yards working in
consortia with engineering and
construction players.
However, many floating pro-
duction, storage and offloading
specialists such as BW offshore,
Modec and Bumi armada have
their own Flng solutions, as does
Singapores Keppel Shipyard.
Keppel has significant floater
conversion experience, including
for lng floating storage and re-
gasification units, but none of
these FPSo contractors has yet
landed an Flng job.
Bumi armada is focusing its
Flng efforts on units with pro-
duction capacities of between
1 million and 2.5 million tonnes
per annum.
the Malaysian contractor is
eyeing the full Flng value chain
from pre-front end engineering
and design through to operations
and maintenance using a lease
and operate business model.
Bumi armada has newbuild
both spread-moored and turret-
moored and conversion Flng
concepts on offer, and has also
developed a hybrid lng floating
storage and regasification barge
(FSRB) concept.
this FSRB comes with a shorter
lead time than even an FSRU con-
version, according to Bumi ar-
mada, which notes a single barge
can accommodate up to 500 mil-
lion cubic feet per day of gas.
SBM offshore has its sights
mainly on mid-scale Flng
projects of between 1.5 million
and 2 million tpa, which the con-
tractor says is suitable for more
than 700 stranded gas fields with
reserves of between 500 million
and 2 trillion cubic feet of gas.
SBM is looking to convert lng
carriers into Flng solutions in
much the same way as has been
achieved for oil FPSos, which
should translate into lower costs
and a shorter timeframe com-
pared to newbuilds.
With such a conversion, the
process facilities along with the
storage and crew living quarters
are located on deck. this novel
topside layout is achieved by join-
FLNG FPSO Water Intake Systems Ooading packages
EPC SURF packages
Barduct Buoyancy modules Crossing sleeper
flexibility and
cost benefits
Mix of newbuilds and
conversions
AMANDA BATTERSBY
Singapore
ing together two lng tankers.
this twin hull concept allows
adequate space for the process
facilities with the necessary
space between sections of equip-
ment to satisfy safety require-
ments, while providing suffi-
cient lng storage capacity, says
SBM on its website.
SBM, together with linde En-
gineering, has performed generic
pre-FEED work for a range of po-
tential reservoir compositions
and environmental conditions,
which can be optimised for spe-
cific fields.
Keppel has its own proprietary
liquefaction technology, PrenEx,
that the company says offers a
simple, safe and reliable alter-
native to other nitrogen expan-
sion processes and that can be
used for both Flng and land-
based facilities.
the contractors Flng solu-
tions have liquefaction capacity
of between 500,000 and 3 million
tpa, with storage capacity rang-
ing from 125,000 to 250,000 cubic
metres.
Keppel is currently carrying
out the worlds first Flng conver-
sion. the Moss-type lng carrier,
Hilli, is being converted into an
Flng unit for golar lng that will
be deployed off Cameroon.
Keppel has been lined up to
convert two more lng carriers
into Flng solutions for golar, for
which it is waiting for notice to
proceed, and the client has initi-
ated talks for a potential fourth
such unit.
Japans Modec and compatriot
toyo Engineering have developed
the liBro Flng concept, based on
lithium bromide absorption re-
frigeration, that is claimed to of-
fer an economic solution for mon-
etising remote stranded gas
reserves.
Modec says the shipyard-
friendly design of the liBro Flng
concept, using a converted stand-
ard bulk carrier rather than a
purpose-built hull, enables early
37
delivery. this Flng solution,
which comes with iHi Marines
self-supporting prismatic iMo
type B tank, has a maximum
achievable production capacity of
2 million tpa.
lng is an area of core value for
Japans JgC, which dates back to
the 1960s when it was first in-
volved with Brunei lng.
JgC has developed sets of pre-
FEED documents for a standard-
ised, modular design for small
and mid-scale Flng of either
1 million tpa or 2 million tpa ca-
pacity.
the vessels are respectively in-
tended to be deployed on fields of
more than 1 tcf of gas for a 20-
year term.
JCg is basing both its Flng so-
lutions on air Products liquefac-
tion technology.
industry-wide standardisation
of equipment and design the
design one, build many ap-
proach needs to be a priority in
the lng industry, says DnV gl
oil & gas global gas segment di-
rector Martin layfield.
More collaboration needs to
come to the fore. this and pricing
is a big challenge, says layfield,
who notes that liquefaction costs
have trebled since 2000.
industry cannot afford to
waste the chance that this [oil
price] crisis affords.
it is the time to address costs,
and industry needs to get their
arms around this.
golar lng and Schlumberger
signed a memorandum of under-
standing in January to co-operate
on the global development of
stranded, greenfield and brown-
field gas reserves.
the duo aims to deliver low-
cost lng production solutions
that will enable the accelerated
exploitation of proven gas re-
serves.
US contractor Schlumberger
will be providing the capital, up-
stream development knowledge
and resources, while golar will
contribute its Flng assets and
technology.
the first project that will avail
itself of this set-up, that the pro-
ponents say will both reduce risk
and secure financing for gas de-
velopments, is expected to be an-
nounced within two months.
Cowen group analysts see this
MoU as a vote of confidence for
Flng technology and its com-
petitiveness in the current price
environment at a time when the
market is losing confidence in
glng.
38   
floating storage and regasification
Contracts: the FSRU Independence in Klaipeda, Lithuania
FSRU market on the upswing
Global fleet of floating storage and regasification units
reaches 23, with another 35 projects in the works
Beate SChjoLBeRG
oslo
T he market for floating
storage and regasification
units has surged in recent
years thanks to rising
supply and falling prices for lique-
fied natural gas at a time when
many countries are looking to add
more natural gas to their energy
mix.
From being a non-existent mar-
ket less than a decade ago, the glo-
bal fleet of FSRUs counted 23 ves-
sels last year, including awarded
contracts.
Another 35 projects are in the
pipeline, mainly in Latin Ameri-
ca, the Middle East and Asia, ac-
cording to major player Hoegh
LNG.
FSRUs differ from traditional
onshore import facilities in a
number of ways they are small-
er, faster and easier to install, and
can be removed again at any
time.
The importer pays the FSRU pro-
vider on a time-charter basis, thus
reducing its own investments to
suitable port facilities and pipe-
lines to bring the gas on to its final
   
destination. The lower invest-
ment requirement and higher
flexibility means that more coun-
tries can afford to enter the LNG
market, and most of the existing
and planned FSRUs are located in
countries that have not previous-
ly imported LNG.
Most of these have no plans to
build traditional onshore termi-
nals and will rely solely on FSRUs
for import, according to figures
from the International Gas Union.
Distribution The use is also dif-
ferent rather than sending gas
into a national pipeline distribu-
tion system, many of the new
FSRU import projects are ear-
marked for electricity production
or industrial use near the import
site.
Some units are also hired on
shorter contracts to meet season-
al or temporary gas-supply defi-
cits.
A case in point is Egypt, where
domestic distributor Egas over the
course of six months last year in-
stalled two FSRU vessels on five-
focus
 
LNG
Volumes: hoegh LNG chief
executive Sveinung Stohle
Photo: sigbjorn sandsmark
year contracts with a combined
capacity of 1.1 billion cubic feet of
gas per day, or 9 million tonnes
per annum of LNG, boosting its
gas supply for power production
amid a national energy shortage.
The country has decided to take
on a third FSRU unit within the
coming year.
The African market is also com-
ing along, with the first FSRU con-
 
tract in sub-Saharan Africa
awarded to Golar LNG in Novem-
ber for a project with West African
Gas in Ghana.
Both Golar and the other major
players expect more African
projects to follow as LNG becomes
affordable for a larger number of
countries.
LNG is available in large vol-
umes and at very competitive
price levels, and will drive up de-
mand for LNG and for import ter-
minals. Today this picture is even
stronger than it has been this far,
Hoegh LNG chief executive
Sveinung Stohle said at the com-
panys most recent quarterly pres-
entation.
Providers US-based Excelerate
Energy and Norwegian players
Hoegh LNG and Golar LNG are the
main providers of FSRU units glo-
bally, with between seven and
nine units each.
BW Gas and Exmar also partici-
pate with two and one unit, re-
spectively, including uncommit-
ted vessels under construction.
29January2016
Photo: HoegH lng
Most of the existing vessels have
a regasification capacity of be-
tween 400 million and 800 mil-
lion cubic feet of gas per day, mak-
ing them smaller than the average
onshore facility.
The cost varies from about $80
million for a converted LNG tank-
er to around $300 million for a
purpose-made newbuild, well be-
low the $1 billion-plus investment
for an onshore terminal.
The current fleet is a mix of
custom-built FSRUs and converted
LNG carriers. Converted units can
be delivered faster and may trade
as LNG carriers in between jobs,
making them flexible for shorter-
term contracts, but they must
head to yards for periodic surveys
every five years.
Newbuild FSRU units have a
longer construction time, but are
generally able to stay docked for
the duration of their contract,
whether it is for five, 10 or 20
years.
Regardless of vessel type, the
lead times remain shorter than for
the larger onshore terminals.