Offshore LNG 2015

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2015 • A supplement to LNG World Shipping

“We expect per unit output costs to reduce for each FLNG constructed... the engineering process can be shortened by about six months.”Colin Wong, vice president, Petronas, see page 18

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comment 5 Why working out which FLNG projects are still going ahead is no mean feat

analysis 6 Floating LNG (FLNG) projects have made slow progress but will smaller-scale ventures open new opportunities? Karen Thomas reports

14 As analysts predict solid demand for floating storage and regasification units (FSRUs), will other shipping companies join the four existing players?

interview 8 Höegh LNG president and chief executive Sveinung Støhle tells Karen Thomas why speculative FSRU orders can offer a competitive advantage

18 Petronas senior vice-president Colin Wong outlines the company’s FLNG plans to Huihui Chen

26 Technip senior managers explain how lessons learned from Petronas’ FLNGs will promote the economies of scale to unlock remote and stranded gas reserves

27 WorleyParsons global LNG business chief Paul Sullivan talks near-shore FLNG opportunities

shipbuilding12 Huihui Chen reports from South Korea on how the country’s yards are targeting small to medium-sized FSRU orders

infographics20 LNG World Shipping maps the world’s FLNG fleet; confirmed orders, planned projects and future offshore LNG hotspots

30 In praise of Prelude: Shell’s floating LNG leviathan scales new heights, lengths and depths

projects23 Russia wants to launch barge-based exports off Gorskaya – but can this near-shore venture succeed where earlier plans have come to nothing?

32 David MacIntyre reports on how the five Browse FLNG partners are pressing ahead with their plans

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www.lngworldshipping.com Offshore LNG | November 2015

contentsNovember 2015

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published November 2015

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Offshore LNG | November 2015 www.lngworldshipping.com

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Discover the upside in this down cycle.We are aggressively helping operators reduce capital investments and improve returns by transforming the way we all do business. By working with us to rethink, reinvent and reimagine field developments, you can dramatically reduce overall costs. We will leverage a new generation of standardized equipment and innovative technologies to squeeze unnecessary cost and time from the value chain. Talk to us today. Because it’s clearly time for a change.

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operations28 Mike Corkhill looks at the challenges facing Shell’s FLNG vessel Prelude

classification societies34 DNV GL sees new opportunity in offshore LNG and has drawn up plans for an uncrewed FLNG to cut costs and remove human error

cargo transfers36 Research and development may soon make tandem offloading of FLNG vessels a reality, reports Mike Corkhill

report 38 Egypt and Jordan have joined the LNG-importers’ club, using FSRUs

viewpoint40 ClassNK’s Hayato Sugo explains how the Japanese classification society is overseeing design, technical and service support for FLNG

coming upThe next bi-monthly print issue of LNG World Shipping is the

November/December issue, which includes a bound supplement on LPG World Shipping. It will also feature:• Report: has Canada missed the boat with LNG?• Ballast water treatment system regulations explained• View from the bridge: a report from on board Aseem as it unloads LNG at Dahej• Profile: StealthGas president Harry Vafias predicts new demand for small LPG carriers

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COMMENT | 5

F LNG allows energy companies to unlock remote or small-scale reserves of gas, and to do so relatively quickly and cheaply.

The technology to do this has existed since the 1970s, however progress has been slow.

New offshore production is just one casualty of some US$200 billion worth of oil and gas project cancellations as energy companies have trimmed their costs to adjust to the drop in international oil prices.

And so the floating LNG (FLNG) club remains a small, select club. So far, just four companies – Petronas, Exmar, Shell and Golar LNG – have booked seven FLNG vessels.

Together, these first seven vessels will be able to produce up to 12.4 million tonnes a year (mta).

Within the coming year, the first two FLNG units are finally due to hit the water. Petronas’ PFLNG1 is likely to come to market first, followed by Exmar’s Caribbean FLNG.

FLNG opens new opportunities for LNG shipping companies, to sell ageing tonnage to convert into floating plants that liquefy and store gas, to convert and manage their own FLNG or to join ventures as operators or shipmanagers.

However, all those opportunities require significant up-front investment.

Analysts describe the four market entrants and their vessels as the “first wave” of FLNG and predict that a second wave will come to market towards the end of the decade, once the technology has proved itself in practice.

Nevertheless many other companies have cancelled or delayed their plans to order FLNGs for the many, many projects announced around the world.

In fact, it is no mean feat to work out which projects remain viable and on track and which have quietly been dropped, delayed or scaled down.

And so the LNG World Shipping team set out to map the FLNG projects around the world and to work out which projects and players that have yet to order vessels are still likely to go ahead.

Our exclusive infographic on p20-21 lists 19 proposed FLNG projects that together could produce up to 89.5mta. Many of these may form part of the much talked-about second wave of FLNG projects likely to come to market in five or six years’ time.

With that next wave of projects in mind, we also looked at which regions around the world are likely to interest shipowners and energy companies once the economic climate starts to favour new investment in FLNG projects.

We look forward to covering progress in the FLNG segment in the year ahead. LNG

MAPPING THE WORLD’S FLNG PROJECTS

“NEW OFFSHORE PRODUCTION IS JUST ONE CASUALTY OF SOME US$200 BILLION WORTH OF OIL AND GAS PROJECT CANCELLATIONS”


Karen Thomas, Editor

Specialist in repair and conversion

Keppel Shipyard is the trusted name for ship repair and conversion. It is the market leader in FPSO, FSO, and FSRU conversions as well as turret, mooring systems and topside modules fabrication.

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F loating LNG (FLNG) allows energy companies to unlock remote or small-scale reserves of gas relatively quickly and cheaply and

to ship it to market, all using technology that has existed since the 1990s.

Offshore projects are often cheaper and can progress more quickly than land-based start-ups, which can face tougher regulatory hurdles and approval processes and more vocal opposition from environmental groups.

Offshore projects should also open new opportunities for LNG shipping companies, whether to sell ageing tonnage to convert into floating plants that liquefy and store gas from offshore fields, to convert and manage their own FLNGs or to join these ventures as operators and shipmanagers.

However, progress has been slow – delays and cancellations are the order of the day. New offshore LNG production is one casualty of an estimated US$200 billion worth of oil and gas project cancellations.

“A lot of these projects will be delayed until the mid-2020s, simply because the money’s not there,” says Douglas-Westwood analyst Ben Wilby.

Analysts put the lull in interest down to slowing Asian LNG demand, low oil and gas prices that have eroded new ventures’ likely returns, and spiralling project costs.

This stands in sharp contrast to demand for import-based floating storage

and regasification units (FSRUs). Some 20 of these projects are now live, whereas the first FLNG has yet to hit the water.

“Because prices have come down, proposed LNG-production projects are now having to be even more competitive than was anticipated earlier,” says Sveinung Støhle, president and chief executive of fast-growing FSRU owner Höegh LNG, which also has FLNG ambitions.

“If prices are halved, project costs must then also be halved for that venture to make economic sense.”

It is now uncertain whether Exmar’s Caribbean FLNG or Petronas’ PFLNG1 will be the first FLNG unit to launch. Caribbean FLNG, originally due for delivery this summer, was delayed at the time of going to press, despite Chinese bank ICBC putting up US$200 million in funding in June.

The FLNG shipowners’ club is small and select. Just four players have ordered these units so far (see infographic, p20-21).

Malaysian energy giant Petronas has ordered two medium-sized units for remote fields off Sabah and Sarawak.

Shell is pressing ahead with the 3.6 million tonnes a year (mta) Prelude unit to be based off Western Australia.

Golar LNG is focusing on small-scale FLNG, for which it is converting older tonnage. In August, it exercised its option at Keppel Shipyard in Singapore to transform


The first two floating LNG units should start work next year but will slowing interest in deepwater projects be offset by new opportunities in smaller, near-shore ventures? Karen Thomas reports

More storms lie ahead for FLNG

Malaysian energy giant Petronas has ordered two medium-sized FLNG units, including PFLNG1

ANALYSIS | 7


a third LNG carrier, the 126,000m³ Gandria, into a liquefaction unit.

Black & Veatch will provide engineering and process design for the project – called a Golar Floating Liquefaction facility (GoFLNG) – and procure the topside equipment and provide commissioning support for the topsides and liquefaction process.

Gandria will be contracted to Ophir, off Equatorial Guinea, from 2019. Golar LNG says that will free its second FLNG unit Gimi to “cover the potential emerging demand for a 2018 GoFLNG project”.

Golar LNG signed a memorandum of understanding with Russia’s Rosneft in March to develop FLNG projects together, although these are “on hold” for now, says chief executive Gary Smith.

Golar LNG has also been linked to near-shore projects in British Columbia, Canada.

Exmar is also targeting small-scale projects, but is building new barges, having ordered a second FLNG unit and holding two options at Chinese shipbuilder Wison Offshore & Marine, which is constructing Caribbean FLNG.

New waveProspective market entrant Höegh LNG hopes to win near-shore LNG contracts, particularly in North America. “This is where FLNG can play an important role,” says Mr Støhle.

“Big, land-based facilities may need to generate 10-15 mta to be economical, whereas an FLNG-based project may need to generate, say, 1 mta.”

It would be wrong to write off the prospects for large-scale FLNG projects, however. This summer Shell ordered the three largest units yet seen.

Samsung Heavy Industries (SHI) landed the US$4.7 billion order to build three hulls for Browse LNG off Western Australia, a project led by Woodside Petroleum. Shell will sign a separate contract for the vessels’ topsides and equipment, subject to basic front-end engineering design (FEED), in the second half of next year.

If the project reaches a final investment decision in mid-2016, the three 3.9 mta units will be deployed by 2023.

Nevertheless, although the first four FLNG projects should have launched by the end of 2018, investors are holding fire on the long-awaited second wave.

As spiralling costs have led to several ventures being delayed or cancelled, this has had a knock-on effect on orders. Two years ago, Flex LNG cancelled its order for four vessels at SHI.

Mid-term prospects look more promising. Research company Douglas-Westwood predicts that investment in offshore LNG will top $58 billion in the next seven years, with liquefaction infrastructure making up 61 per cent.

“In 2015 we expect something of a pause in new commitments given both the first-in-line-to-be-second approach to the technology and the capex cutbacks we have seen as a function of lower oil and gas prices,” says Mr Wilby.

Douglas-Westwood forecasts a dip in FLNG spend as the first installations are completed in 2018 but for a second wave of projects towards the end of the decade that “will then drive spend to new heights” – although new projects are unlikely to equal Prelude in cost.

These new FLNG projects will be concentrated in Australasia, Asia, the Gulf of Guinea, east Africa and the eastern Mediterranean. Israel is studying whether to

develop the second phase of its Leviathan LNG project using floating vessels, a project involving energy giant ExxonMobil.Clarksons calculates that by 2019, FLNG projects will produce 44 mta, accounting for 7.5 per cent of global industry capacity. Meanwhile, KPMG is predicting that by 2022, 22 FLNG units will be in place around the world, with up to 22 more under discussion.

That begs the question which other shipowners will join Shell, Petronas, Exmar and Golar LNG to order FLNG vessels.

BW Offshore, Teekay LNG and SBM Offshore are “interested in constructing FLNG ships for lease, as with ordinary [floating production storage and offloading units]”, says KPMG Australia partner Jonathan E Smith.

KPMG cautions the smart shipowner to hold back for now and to spend the hiatus ironing out the legal and contractual complexities of FLNG, tackling the technical issues, nailing down construction costs and building relationships with prospective financial backers.

It says banks will back new projects only when FLNG has proved itself and predicts that, for now at least, continued delays and rising costs will deter all but the largest and most resilient energy firms – particularly when it comes to the largest deepsea projects.

“Project finance will only readily be available once FLNG has proved its viability,” KPMG concludes. “With Prelude costing an estimated US$12 billion, FLNG projects will still largely be the domain of the supermajors.” LNG

“NEW OFFSHORE LNG PRODUCTION IS ONE CASUALTY OF AN ESTIMATED US$200 BILLION WORTH OF OIL AND GAS PROJECT CANCELLATIONS”

Shell will deploy the 3.6 million tonnes a year (mta) Prelude off Western Australia

Sveinung Støhle: It has taken eight years for Höegh LNG to refine its

position in the FSRU market

‘SPECULATIVE?IT’S NOT A NEGATIVE’

INTERVIEW | 9


Höegh LNG is repositioning itself as an energy-

infrastructure company, transforming itself from a shipping-led business into a major player in floating LNG (FLNG).

It aims to lead the industry in ordering, designing, owning and operating floating terminals, securing long-term contracts for floating storage and regasification units (FSRUs) and seeking to enter the FLNG business.

The company retains a fleet of four conventional LNG carriers but now owns eight FSRUs plus one option and has pledged to increase that fleet to 12 units by 2019.

The FSRU market is growing fast. Research carried out by this magazine over the summer identified 23 FSRUs on the water or on order and nearly 30 proposed projects around the world.

Höegh LNG president and chief executive Sveinung Støhle, speaking exclusively to LNG World Shipping, says he expects to order “one or two” FSRU newbuildings a year to the end of the decade, making a total fleet of 12 units a conservative target.

“I would be very disappointed if we did not reach 12 FSRUs. I think we can do better than that,” he says.

Investment bank Arctic Securities thinks so too. It predicts that the Höegh FSRU fleet will grow even faster, given a surge in interest from developing countries in floating import terminals.

“The strategy Höegh LNG has followed since it became a separate unit eight

years ago has been to focus on the FSRU segment,” Mr Støhle says. “Our business model is that we design, order build, own and operate our own FSRUs.

“We are not interested in conversions; we believe that these are a thing of the past. To get the full benefit of technological development, we believe it is always best to buy new. That way you get today’s technical advances and efficiency to deliver the best solution.

“We also order before we have the contract. Some people use the word speculative, and that’s a word that’s OK with me – it’s not a negative, it’s a positive.

“We order what we know the market wants, and because it takes 28 to 30 months to build an FSRU from the time of signing the contract, we would otherwise always be late with the delivery.

“Our policy is always to have at least one FSRU on order. As soon as we get an order, our policy is to press the button at the shipyard to order one more.”

After political upheaval forced Egypt National Gas (EGAS) to switch from exporting to importing LNG, Höegh was able to deliver a vessel to Ain Sokhna within five months of landing the contract. The 170,000m3 Hoegh Gallant will deliver up to 3.7 million tonnes a year (mta) under a five-year deal.

Höegh LNG’s remaining six contracted FSRUs are fixed to 20-year deals. In May, the company signed a contract to supply an FSRU to Octopus LNG – “this will probably

be for FSRU number eight; number seven is still open”, Mr Støhle says – to import gas through the Penco-Lirquen LNG terminal in Chile.

FSRU demand has grown as falling gas prices have made imported LNG more attractive as a feedstock for power generation, particularly for developing countries and those seeking to cut their dependence on oil or coal.

Little wonder the number of units is growing. BW Gas and Mitsui OSK have entered the market – joining Höegh LNG, Golar LNG, Excelerate and OLT – having ordered two and one FSRUs apiece.

However, senior Mitsui OSK officials tell LNG World Shipping that although the company hopes to add up to three FSRUs, it is unlikely to order its own units in future and will limit its engagement to operations, rather than investing either in conversions or newbuildings.

“This is not a straightforward market,” Mr Støhle acknowledges. “It is not the same at all as operating LNGCs – the investment is significantly higher. It has taken us eight years to refine our position in the market.”

OpportunitiesTo finance its expansion, Höegh is dropping its FSRUs down to master limited partnership company Höegh LNG Partners LP and securing diverse sources of equity to support future orders. Earlier this year, the company also successfully issued an unsecured dollar-denominated US$130 million bond in the Nordic market.

Mr Støhle sees particular opportunity in Latin America, offering a solution to the continent’s growing shortages of gas for electricity generation. Importing LNG is often quicker and cheaper than building pipelines to deliver the natural gas that fuels power stations.

Here, he sees the US as an obvious supply market. “People have been saying that all the new export volumes from the US will go to Asia,” he says. “I’ve been saying for a long time that this will not be the case – the volumes are too big, and a major proportion of these exports will almost certainly end up in the Atlantic.

“I’m convinced that a large proportion of the US’ 40 mta of exported LNG will end up in Latin America, replacing the oil products that these countries are now

The Höegh LNG boss tells Karen Thomas why his company is targeting floating LNG and why – at least with FSRUs – it orders the tonnage before landing the contract

“WE WANT TO TAKE A VERY LOW-RISK APPROACH TO FLNG. THAT MAY CHANGE OVER TIME, BUT WE ARE TALKING ABOUT A SIGNIFICANTLY HIGHER INVESTMENT THAN FOR FSRUS”

10 | INTERVIEW


using for power generation. “Gas is cheaper than most comparable fuels, and will remain so for most of these markets. That will also have a positive effect on the carrier market. Trouble is, the carrier market at the moment is very, very oversupplied.”

Other target regions include Africa and the Middle East, and parts of Asia – “although here, things take a little longer to develop”, Mr Støhle says.

Meanwhile, he is more bullish than bearish about prospects for China, where Höegh LNG Partners owns the 145,000m3 GDF Suez Cape Ann, chartered to Engie and sublet to China National Offshore Oil Corp (CNOOC) to import up to 2.2 mta to Tianjin LNG.

“We own the only FSRU operating in the market,” he says. “But interesting things are happening, given the size of the Chinese market, and now China is licensing more companies to import LNG. We are working on two or three prospective projects there.

“These will probably take a little more time. But it’s all a matter of price – about who is competitive. Gas will be competitively priced in the near future.”

Over in the UK, Höegh LNG will supply an FSRU to the 6 mta Port Meridian LNG project in which E.ON will import gas from Magnolia LNG in the US through Morecambe Bay. The final investment decision is due in mid-2016.

“This will be for FSRU number 10 or 11,” Mr Støhle says. “We will need to make that decision next year. We have an exclusive deal for this project that also requires us to deliver two LNG carrier newbuildings.”

Floating productionHöegh LNG has also pledged to enter the floating LNG (FLNG) business. Here, progress has been halting and the company has yet to order any units.

That hesitation reflects a wider trend. Low oil and gas prices, coupled with spiralling project costs, have led many new export projects to be delayed or cancelled.

Höegh LNG will target niche projects, Mr Støhle says – that means small, barge-based near-shore ventures, not multi-billion dollar deepwater projects on the scale of the Australian ventures involving Shell.

Höegh LNG is targeting barge-based FLNG projects of around 1 mta, those similar in scale to the ones its FSRU rival Golar LNG has targeted by booking speculative conversions.

“But we will not be pursuing any speculative FLNG projects,” Mr Støhle says.

“We will make the decision [to invest in FLNG] once we have in place a cost from the engineering company that makes sense, and once we have sold the capacity to third parties on a long-term basis. If that takes a bit more time, that’s fine – it takes a bit more time.”

In late September, Höegh LNG won the contract with Bechtel to carry out pre-front end engineering and design work on Malahat LNG, a proposed 6 mta project off Vancouver Island, on waters that fall within the territory of the Malahat first nation in British Columbia, Canada.

“FLNG is a very different market to FSRUs, involving very different risks and investment levels,” Mr Støhle says. “We are working on projects in which we would carry out the engineering and

secure the clients and place the FLNG order.” FLNG start-ups have made slow progress, reflecting low oil prices, spiralling project costs and high market-entry costs. Despite these obstacles, Mr Støhle remains convinced that opportunities exist.

“Our figures suggest that we can do this, on a competitive basis – even in the price environment that we see today,” he says. “We are working on two or three projects all of which, I believe, have the potential to be a commercial success.

“We want to take a very low-risk approach to FLNG. That may change over time, but we are talking about a significantly higher investment than for FSRUs. Depending on the size, we’re talking about anything from US$700-800 million to US$1.5 billion. Therefore we need to balance the risks.

“Two or three years down the line, we hope that we will have placed at least one FLNG order. Golar is already in there. Exmar has one unit and says it has ordered another. Other companies are also looking. So [will we also order], yes, why not? Absolutely, yes.” LNG

Höegh LNG expects to order one or two FSRU newbuildings a year to the end of the decade

INTERVIEW | 11


Hoegh Grace170,000m3

Capacity: 3.75 mta

Cartagena, Colombia to 2036

GDF Suez Neptune145,000m3

Capacity: 5.5 mta

Chartered to Engie as an LNG carrier

Independence170,000m3

Capacity: 2.9 mta

Klaipeda, Lithuania to 2024

Hoegh Gallant 170,000m3

Capacity: 3.7 mta

Ain Sokhna, Egypt to 2020

PGN FSRU Lampung170,000m3

Capacity: 1.8 mta

Sumatra, Indonesia to 2034

GDF Suez Cape Ann 145,000m3

Capacity: 2.2 mta

Tianjin, China to 2020 plus options

Hull no 2685/FSRU#8 170,000m3

Capacity: 3.75 mta

Penco-Lirquen, Chile

Hull no 2551/FSRU#7 170,032m3

Capacity: TBC

Location TBC

HÖEGH’S FSRU FLEET AND ORDERBOOK

12 | SHIPBUILDING


Asian shipyards target small to mid-scale FSRU orders

Yard operators in South Korea and Singapore are increasing their efforts to meet emerging demand for small to mid-scale regasification projects.

In just 10 years since the launch of the world’s first floating storage and regasification unit (FSRU) in the US Gulf of Mexico, adoption of the technology has spread across gas-hungry nations worldwide.

Installing FSRUs is often cheaper and quicker than building shore-based plants, enabling states to fast-track development of gas-distribution infrastructure. There are already more than 20 FSRUs around the world and demand is growing fast.

Indonesia plans to develop small-scale regasification and power plant infrastructure at 32 locations.

In July, Gazprom and Gasunie signed a framework agreement to develop a small LNG-receiving terminal in northwest Europe to store and redistribute LNG, including gas as a marine and vehicle fuel.

In South Korea, top shipbuilders with experience of building LNG carriers of 160,000m³ and larger are racing to launch new regasification vessel designs. Smaller yard operators in Asia have also followed suit.

Daewoo Shipbuilding & Marine Engineering (DSME) has completed the conceptual and basic design for a floating storage power plant (FSPP) that can generate up to 200MW.

DSME general manager product strategy Stephano Heo told LNG World Shipping that the new product will meet the LNG-import requirements of developing countries such as Indonesia.

The Okpo-based company is keen to secure more orders to manufacture its proprietary LNG-fuelling systems.

Hanjin Heavy Industries (HHIC) is also eyeing opportunities in Indonesia. “We are reviewing small-scale FSRU designs with storage of up to 25,000m³ for demand in countries such as Indonesia,” says senior principal design engineering Lee Ki-Choon.

InnovationHHIC has developed a new FSRU design and is considering both open and closed-loop heating systems for intermediate fluid vaporisers, Mr Lee says.

The shipbuilder developed a design for a smaller unit, a 14,000m³ FSRU, following an enquiry from Europe some years ago.

Meanwhile, Samsung Heavy Industries (SHI) has focused on designing a midscale FSRU and power plant with storage capacity of 80,000-100,000m³.

SHI is likely to continue to be selective in pursuing orders for FSRUs, not least because its Geoje-based yard has landed a slew of contracts to build floating LNG (FLNG) facilities.

These include Shell’s 3.6 million tonnes a year (mta) Prelude and PFLNG2, Petronas’s second FLNG unit. Then, in July, SHI landed a US$4.7 billion order from Shell to build the hulls for the three FLNGs that the Woodside Petroleum-led Browse LNG consortium plans to base off Western Australia.

In Singapore, SembCorp Marine is giving its South Korean rivals a run for their money based on a new design that aims to offer an integrated regasification alternative to FSRUs.

Sembmarine has developed a scalable, modular concept that can be extended across regasification, power generation and LNG bunkering operations. The design of the terminal came from Norway-based developer GraviFloat, in which Sembmarine bought a 12 per cent stake last year.

The concept is for a facility to supply 10,000-500,000 tonnes of LNG a year, generating 20-500MW of electricity.

Developers claim that a GraviFloat terminal requires capital expenditure of US$1,350-1,600 per cubic metre, compared with US$1,500-2,200 for an FSRU and US$2,500-3,000 for a land-based LNG-import terminal. LNG

South Korean and Singaporean shipbuilders are stepping up their drive to design and build small to mid-sized LNG-import units. Huihui Chen reports

Sembmarine has designed an integrated regasification alternative to FSRUs

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Yngvil Asheim: “Depending on customer and project requirements, BW is open to

newbuildings and conversions”

14 | ANALYSIS

ANALYSIS | 15


FALLING GAS PRICES BOOST FSRU DEMANDDemand for floating storage and regasification units has never been higher – but which shipping companies will benefit? Karen Thomas reports

G rowing demand for floating storage and regasification units

(FSRUs) stands in stark relief to an LNG shipping market that has had a tough 2015 as falling prices have slashed the cost of importing gas by half.

The International Gas Union forecasts that the number of LNG-importing countries will rise from 29 in 2014 to 48 by 2025. FSRUs will play a decisive role: this year, Pakistan, Egypt and Jordan joined the club of LNG-importers that use FSRUs.

Costing around US$300 million apiece, FSRUs are cheaper and quicker to order than land-based terminals, which often face tougher regulatory hurdles.

At the time of writing, the live fleet numbered 23, comprising nine FSRUs plus one adapted LNG carrier at Excelerate, six FSRUs at Golar LNG, five at Höegh LNG and one apiece at BW Gas and OLT. The orderbook stands at five vessels: two for Höegh LNG and one apiece for BW, Mitsui OSK Lines (MOL) and Golar LNG.

Analyst Douglas-Westwood predicts that the total will increase to 55 by 2022, with demand concentrated in Asia and western Europe, “subject to improvement in the spot price”.

“We believe that 23 new orders are likely within the next few years,” Douglas-Westwood analyst Ben Wilby says.

Excelerate predicts four to five new FSRU projects a year in the short term, with a mix of smaller and larger ones coming to market.

The question is whether the six existing players can meet all that demand or whether the market will gain new entrants.

“I would be very surprised if that is not the case,” says Höegh LNG president and chief executive Sveinung Støhle.

“The alternative is to be in the LNG-carrier market, where the rates and the returns are not good, to put it diplomatically, and are likely to stay low for quite some time. In addition, the competition there is very tough.”

However, costs remain a major barrier to new providers to the market. Recent arrival Japan-based MOL will place a 263,000m3 converted FSRU at GNL del Plata in Uruguay, handling up to 4 mta under a 20-year contract to start in mid-2017.

Conversion costs for the vessel spiralled and although MOL hopes to add “two or three” FSRUs to its fleet, it will now sell ageing tonnage to others to convert,

preferring to limit its future involvement to operating and shipmanagement.

Although it is cheaper to order an FSRU than to build a regasification terminal, the vessels cost a lot more than LNG carriers – and most shipping companies are looking to cut their capital expenditure.

“An FSRU is not an off-the-shelf order,” says Mr Støhle. “There are still barriers to entry. The most important of these is the fact that most of this business takes place on the basis of tenders. You need to prequalify – and here the criteria is almost always whether you have built, owned or operated an FSRU before and whether or not you have an FSRU on order.

“If you cannot answer yes to both questions, normally you will be excluded. But will that continue to be the case? Not necessarily.”

Mr Wilby agrees. “Golar LNG, Höegh LNG and Excelerate are very well-established,” he says. “We don’t anticipate a rush to order at a time when shipowners are cutting their capex.

“In the longer term, however, LNG is seen to be pretty future-proof for the next 50 years. Other

players will look at FSRUs and decide that they want a piece of that sector.”

InterestOne company expressing an interest – and in ordering newbuildings at Chinese shipyards – is China National Offshore Oil Corporation (CNOOC), which sublets China’s sole existing FSRU, the 145,000m3 Höegh LNG vessel GDF Suez Cape Ann, at Tianjin LNG.

“We may well see a lot of new FSRU orders go to China,” Mr Wilby says. “It will certainly offer lower costs than going to South Korea.

“We don’t expect to see China rushing in and ordering 10 or 15 FSRUs in one go – but certainly, compared to other regions, China will order a lot [of units], as will India and Indonesia.”

Another prospective market entrant is George Prokopiou-led Dynagas. “We are looking at the gas market and at the likelihood of lower gas prices in future and we feel that this regasification solution is more attractive than it used to be, in a low-cost environment,” says Dynagas chief executive Tony Lauritzen.

“Our strategy is to grow particularly in LNG shipping but also to diversify into


16 | ANALYSIS

“A LOT OF PEOPLE ASSUME THE FSRU BUSINESS IS LIKE THE SHIPPING BUSINESS. IT’S REALLY NOT. FSRUS ARE DEVELOPMENT- AND IMPLEMENTATION-INTENSIVE” – ROB BRYNGELSON, EXCELERATE

regasification solutions.”Mr Lauritzen hints that

Dynagas may order vessels ahead of securing a contract – a strategy Höegh LNG has pursued with success. “The appeal of FSRU solutions is that they can be ready within a very short period of time compared to land-based solutions,” he says.

“To have such a solution at hand is more interesting for the end user, who is often under pressure to come up with a solution… It’s something we haven’t made a decision on yet. The will is there and the experience is there – we just haven’t yet identified the right project.”

Meanwhile, US-based Excelerate plans to expand its nine-strong FSRU fleet. It has four options at South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME) and is “looking at as many as five ship conversions”, according to chief executive Rob Bryngelson.

“There’s a broad range of opportunity in the FSRU space and not every project needs a vessel similar to the [5.6 mta Experience] we built for Petrobras,” Mr Bryngelson says.

“Not every situation makes sense for a newbuild, so our strategy is a combination of newbuilds and conversions. We can get conversions to market in a little over a year and a half. Newbuildings take 30-32 months, so there’s a timing advantage.”

Excelerate is not averse to speculative orders, even though such newbuildings will

need to be modified to suit the customer’s unique needs.

“When the time is right, we will launch into newbuilds,” Mr Bryngelson says. “No two deals are the same – you have different environmental conditions and requirements; the vessel may be moored or offshore, you may be transferring LNG across or along a dock. All projects have their intricacies and we try to stay as flexible as possible.

“A lot of people assume the FSRU business is like the shipping business. It’s really not. The hard part of the business isn’t the operation of the ship, it’s putting in the hard work to bring the project together. FSRUs are development- and implementation-intensive.

“Sure, other people can come into the business, but there’s a lot more to it than just showing up with a ship. We aren’t talking to customers who simply want LNG; we are talking to customers that need gas. They don’t want to have to worry about building the infrastructure, or shipping LNG, or integration – they just need it to work.

“We spend a lot of time with our customers, making sure that there aren’t any gaps or interface points that aren’t covered. You really have to be committed to putting in the time – with that customer and in that country.”

OpportunitiesHöegh LNG’s Mr Støhle is sanguine about the prospect of new competition, arguing that new export volumes from

the US and Australia will open new import opportunities. “As long as the market keeps growing and as long as Höegh LNG can maintain its relative share of the market, winning one or two new contracts a year, we will continue to be very successful in this field,” he says. “And if we add just one a year, I’ll be very happy.”

In September Golar LNG won the exclusive right to provide an FSRU to a Gen Power Group project in Sergipe in northeast Brazil.

Golar is also said to be discussing up to two FSRU orders with Samsung Heavy Industries (SHI).

As the balance shifts from a seller’s market to a buyer’s market, new importing countries are emerging, from Morocco to Namibia and from Chile to Vietnam.

Political troubles have forced Egypt, previously an exporter of gas, to import LNG to meet its power-supply requirements. This summer, Egyptian Natural Gas (EGAS)

Rob Bryngelson: “When the time is right, Excelerate will launch into newbuilds”

booked a second FSRU at Ain Sokhna, chartering the first BW FSRU, the Samsung Heavy Industries (SHI)-built BW Singapore, for five years.

“Depending on customer and project requirements, BW is open to newbuildings and conversions, says BW Shipping managing director Yngvil Asheim. “Our first two FSRUs are newbuildings built at SHI.

“We are delighted to have been selected as the FSRU provider by EGAS and look forward to supporting Egypt in this project of national importance.”

Egypt plans to lease a third FSRU next year.

Excelerate casts its net wide. This autumn it was pondering a development list of 31 projects – having secured five new contracts and two extensions in the last two years. It sees particular opportunity for FSRUs in Latin America, the Middle East and the Indian subcontinent.

It is positioning itself as a full-service project partner, involved in everything from converting or building the vessels to full engineering procurement and construction, logistics and ordering the ship-to-ship cargo transfer.

It also plans to branch out into small-scale distribution

and LNG bunkering and to work as a consortium partner to larger, more complex gas-to-power projects.

Mr Bryngelson confirms two business gains – one to supply an existing 3.9 mta FSRU for a 15-year charter to Bangladesh from 2017, a second to supply a newbuild 4 mta FSRU to Kolkata in India for 25 years from 2019.

Mr Bryngelson sees opportunities to act as a bridge to import start-ups.

“Say the customer wants 750 ft3/day of vaporisation capacity, we may be able, for the first year, to bridge that with a smaller vessel and

deliver a bespoke design afterwards. No project goes from zero to 100 immediately.

“That gives us the time to work with the customer to build exactly what they want.”

These are busy times for FSRU operators and Douglas-Westwood expects demand to continue to grow, reflecting import demand across Asia and western Europe.

However, it also concludes that mapping that demand may not be easy for market entrants. “As a newcomer, you will not necessarily get the business by placing the lowest bid,” Mr Wilby concludes. “Experience counts.” LNG

US-based Excelerate plans to expand its nine-strong FSRU fleet

ANALYSIS | 17

18 | INTERVIEW


Petronas outlines its FLNG strategySenior vice-president technology and engineering Colin Wong discusses the group’s offshore plans with Huihui Chen

What is motivating Petronas to invest in FLNG technology?

Petronas is investing in floating liquefied natural gas (FLNG) plants to capture and monetise gas reserves in remote fields that cannot be connected to existing pipeline infrastructure and are too marginal to develop using [large-scale] LNG plant.

Our FLNGs are much smaller than Shell’s Prelude FLNG and easier to mobilise in stranded fields, typically defined in Malaysia as anything with 1 trillion cubic feet of gas reserves.

With PFLNG1 and PFLNG2, we can also offer production-sharing contract holders in Malaysia flexibility in developing their gas discoveries, through tie-ins to an existing network of export pipelines or through an FLNG.

Petronas has ordered two FLNG units: how do PFLNG2 and PFLNG1 differ in specification?

The higher designed production capacity of 1.5 million tonnes a year (mta) translates to heavier

tonnage for PFLNG2, but the overall tonnage increment is mitigated by the selection of a higher-powered gas turbine, the LM6000, for the refrigerant, compared with the LM2500 unit on the 1.2 mta PFLNG1.

PFLNG2 will also be equipped with extra monoethylene glycol (MEG) modules for hydrate removal and a Sofec external turret for operations in a deepwater field. The dry weight of PFLNG2 is projected at more than 140,000 tonnes, about 30 per cent more than PFLNG1.

What are the development costs for each project?

We are not ready to answer the cost question but it is safe to say that the cost of PFLNG1 falls between US$1 billion and US$10 billion. PFLNG2 is slightly more expensive, potentially in the range of 10 per cent more.

On a per unit basis, the development cost is roughly around US$10 more per million British thermal units for PFLNG1 than for an onshore LNG plant. However, we expect per unit output costs to reduce for each subsequent

FLNG constructed. Once the industry acquires the experience, the engineering process can be shortened by about six months.

How did you select the contractors for these projects?

Petronas has commissioned Technip and Daewoo Shipping & Marine Engineering (DSME) for delivery of PFLNG1. We selected Technip because the French engineering contractor met the unique requirement of possessing experience with both onshore and offshore LNG projects. DSME came on board after a yard-selection process.

JGC Corp and Samsung Heavy Industries (SHI) won the PFLNG2 contract having emerged as victors over another competing consortium, comprising Modec, CB&I and Toyo Engineering Corp in a design contest.

Construction of PFLNG1 and PFLNG2 is undertaken mostly in South Korea by SHI and DSME, save for selected modules, including a flare tower for PFLNG1 in China and the external turret for PFLNG2, made by Malaysia Marine Heavy Engineering.

Colin Wong: Petronas will be a pioneer of FLNG technology when PFLNG1 enters production


What were your considerations when you chose the containment solutions for the projects?

Petronas selected membrane LNG storage tanks for both after taking into consideration the robustness and cost advantage of the proven containment technology.

The self-supporting prismatic Type B (SPB) containment system was also under consideration in a proposal put forward by the Modec-CB&I-Toyo Engineering consortium when it participated in the design competition for PFLNG2.

We are looking at two-row, eight-tank membrane storage systems, each tank pegged at about 22,000m3 in capacity, on PFLNG1 and PFLNG2. Sloshing will be mitigated with smaller storage tanks.

What progress have you made on the projects and where and when will they enter production?

Construction on PFLNG1 will be completed by the end of 2015 at the DSME yard in Okpo, South Korea. It is scheduled to leave DSME in February 2016, after the monsoon season, to undergo commissioning at the Kanowit field off Sarawak.

Commissioning is expected to take about two months, in time for first gas during the first quarter of 2016. We expect PFLNG1 to be the first FLNG to enter production.

First steel on PFLNG2 was cut in June 2015 at the SHI yard on Geoje Island, South Korea. It will be deployed in the Murphy-operated Rotan field in Block H, off Sabah.

There is no existing gas-export infrastructure in the vicinity of Block H. The first gas is targeted for the first quarter of 2018.

How has Petronas applied proprietary technology in developing the FLNG units?

Petronas has collaborated with Malaysia-based NGLTech to develop the SEP-iSYS technology, which will be applied to the gas-and-liquid separation processes on board PFLNG1 and PFLNG2.

The SEP-iSYS system is able to accommodate large slug volumes without causing flow fluctuations at the downstream processing facilities and to break emulsions before the liquid enters the separator, to provide high liquid droplet removal efficiency. It is compact, with minimal space and weight, and requires minimal controls.

Why did Petronas decide to deploy PFLNG1 at Kanowit, a field that has been exporting gas to the Malaysia LNG plant at Bintulu?

Petronas will be a pioneer of FLNG technology once PFLNG1 enters production. The intention is to test-produce PFLNG1 at an existing field for around five years. Once it is proven successful, PFLNG1 can easily be modified and mobilised for production in other fields.

How has PLFNG1 been designed to work off Sarawak?

PFLNG1 is initially equipped with a Sofec mooring system to operate in up to 200m of water, but this can be upgraded at a later stage to cater for deep-water fields. At present, PFLNG1 is being built to process gas with up to 10 per cent carbon dioxide content, consistent with the profile of producing fields off Malaysia.

The vessel design provides for the future addition of another acid gas-removal unit to take in gas of up to 20 per cent carbon dioxide content. We have also built in a mercury-removal unit.

The vessel comes with

processing, removal and storage units for gas with varying hydrogen-sulphide content, as well as heavier streams of condensate products. PFLNG1 comes equipped with five loading arms built to sufficient height to cater for offloading operations alongside membrane or Moss-type LNG carriers.

What is the commercial arrangement for owning and operating PFLNG1 and PFLNG2?

Petronas has set up two private entities, PFLNG1 (L) Limited and PFLNG2 (L) Limited, to own the two FLNGs. These entities will also be responsible for the operations of the two FLNGs.

Where do you plan to redeploy PFLNG1 and PFLNG2?

Although both PFLNG1 and PFLNG2 are designed to operate for 20 years, Petronas has not assigned any further fields to PFLNG1 after its first five years in Kanowit. PFLNG2 is expected to spend 10-15 years at Murphy’s Rotan field in Block H and is likely to remain there through its 20-year designed production life. LNG

PFLNG1 is being built at DSME’s Okpo shipyard in South Korea (Petronas)

PLANNED AND PROPOSED


Future FLNG hotspots

Confirmed vessels

Proposed vessels

AMERICAS

ConfirmedExmar/Pacific Rubiales

Caribbean FLNG

Colombia, TBC

LNG capacity, mta: 0.5

Shipyard: Wison, China

Delivery: 2016

ProposedExmar/ALNVLP/EDF

Douglas Channel FLNG

Kitimat, British Columbia

0.6 mta


Delivery: 2018

Haisla Nation

Cedar 2


5.8 mta

Talks with Golar LNG

Haisla Nation

Cedar 3


5.8 mta


Haisla Nation

Cedar 1


2.9 mta


Steelhead LNG

Malahat FLNG

Mill Bay, Vancouver Island

6 mta

Pre-FEED, Bechtel/Höegh LNG

Eos LNG

Brownsville, Texas

LNG Capacity, mta: 12


Six-barge venture

Barca LNG

Brownsville, Texas

12 mta


Six-barge venture

Cambridge Energy

CE FLNG

Venice, Louisiana

5 mta

Shipyard: DSME/Kanfa Aragon

Two vessels

Fairwood Peninsula Energy

Delfin LNG

Port Delfin, Louisiana

8 mta

Delivery: 2019

FEED, Bechtel

AFRICA

ConfirmedGolar LNG

Gimi

2018 start data

2.2 mta

Shipyard: Keppel, Singapore

Delivery: 2017

Golar LNG

Hilli

Kribi Field, Cameroon

1.2 mta


Delivery: 2017

KEY

Golar LNG

Gandria

Fortuna LNG, Equatorial Guinea

2.2 mta


Delivery: 2018

ProposedENI

Coral South Field, Mozambique

2.4 mta

Shipyard: DSME

Delivery: 2019


AUSTRALIA

ConfirmedShell

Prelude

Broome, Western Australia

3.6 mta

Shipyard: Samsung, South Korea

Delivery: 2017

ProposedWoodside/Shell/BP/PetroChina

Browse LNG

Western Australia

3.9 mta


Delivery: 2023

FID expected mid-2016

Woodside/Shell/BP/PetroChina

Browse LNG

Western Australia

3.9 mta


Delivery: 2023


Engie/Santos

Bonaparte FLNG

Northern Territory, Australia

2 mta

Scaled-down barge venture

Woodside/Shell/BP/PetroChina

Browse LNG

Western Australia

3.9 mta


Delivery: 2023


ExxonMobil/BHP Billiton

Scarborough LNG

Scarborough Field,

Western Australia

6.5 mta

SOUTHEAST ASIA

ConfirmedPetronas

PFLNG1

Kanowit, Sarawak, Malaysia

1.2 mta

Shipyard: DSME, South Korea

Delivery: 2016

Petronas

PFLNG2

Rotan, Sabah, Malaysia

1.5 mta


Delivery: 2018

ProposedInpex/Shell

Abadi FLNG

Arafura Sea, Indonesia

7.5 mta

Delivery: 2020

FEED, scaled-up project

EUROPE

ProposedLNG Gorskaya

Gorskaya, St Petersburg, Russia

1.3 mta

Shipyard: United Shipping Corp

Delivery: 2017

OPTIONSExmar

option

LNG capacity: TBC


Exmar

option

LNG capacity: TBC


© LNG World Shipping,

November 2015

Research:

Karen Thomas

Mike Corkhill

Graphic:

Ram Mahbubani

FLNG PROJECTS

PROJECTS | 23


LNG Gorskaya floats an answer to Baltic bunker-supply needs

An ambitious Russian start-up plans a gas-fuel hub for the Baltic based on near-shore FLNG units moored north of St Petersburg. Karen Thomas reports

This summer brought news of progress on a project that could become the first floating LNG (FLNG) venture in Europe. Starting with one barge-mounted plant of 420,000

tonnes a year, the venture plans to expand to up to three barges with the same capacity, all moored off Gorskaya, north of St Petersburg in Russia.

Project developer LNG Gorskaya aims to open the first phase of the barge-based LNG-production plant as early as December next year and to start to export from mid-2017, subject to financing.

If all goes to plan, the trio of barges will produce nearly 1.3 million tonnes a year (mta) of LNG for export and for sale as marine fuel. Total capital expenditure for the first phase is likely to be around €220 million (US$247.6 million).

The barges will serve a fleet of up to nine bunker-supply ships able to deliver LNG to customers across northern Europe, serving ports across the Gulf of Finland. The venture comprises a floating plant, a pier, a loading rack and connection to the gas pipeline.

The barges’ design comes from the Centre of Marine Technology (Shelf ), a consultancy based in Astrakhan on the River Volga in southern Russia that has designed numerous drilling and offshore exploration platforms for oil and gas projects across the country and the former Soviet Union.

LNG Gorskaya is leading the consortium that will carry out the engineering studies and construction work. It will order the barges and assemble the topsides and equipment at the port and will own and operate the FLNG and supporting bunker-supply ships.

Italian engineering company Nuovo Pignone, a subsidiary of GE Oil & Gas, will produce and supply the main equipment for the FLNG, including one main refrigerant compressor, two nitrogen-expander compressors and two LNG boil-off gas compressors for delivery within 14 months.

In May, LNG Gorskaya announced that it has contracted United Shipbuilding Corp to construct three 7,300m3 LNG-bunker supply ships for delivery within 22 months, with six options, in an order it values at Rbs5.67 billion (US$85.6 million). It also plans to deploy a fleet of road tankers to deliver LNG to neighbouring Finland.

LNG Gorskaya is reticent about its backers, saying only that the partners have “experience in oilfield activity”. It values the total cost of LNG-related project elements at €600 million.

LocationDirector-general Kirill Liats says Gorskaya was an obvious location for such a project as the port was abandoned in the mid-1990s following the break-up of the Soviet Union. Today, the derelict site has abundant land for redevelopment and is just 10km from Russia’s existing northbound gas pipeline.

Earlier plans by BaltGazBunker to set up an LNG export and bunkering venture at Gorskaya for a 2016 start seem to have fallen through. However, Russia is seeking new ways to get its gas to market and admits it has been slow to tap growing world demand

Kirill Liats: our expenditure will be some 30 per cent less than for an on-shore plant

24 | PROJECTS


for LNG. Gazprom has looked into opportunities to build an LNG-export project at the Baltic port of Ust-Luga. And in March, Rosneft signed a memorandum of understanding with Golar LNG to work together on FLNG-related projects.

Rosneft is reported to be studying LNG-export opportunities at Gorskaya, Ust-Luga and Bronka to serve the Gulf of Finland. It confirmed in September that it is unlikely to launch LNG exports from Sakhalin in Russia’s Far East until 2020 at the earliest – at least two years behind schedule.

Mr Liats says there were solid financial reasons to structure the plan around a floating plant. There is “good state support” to build such vessels in Russia, he says.

“We are avoiding value-added tax, property tax and salary taxes for the crew until 2037.”

The Russian Maritime Register has “more flexible” requirements than the land-based authorities apply to shore-based ventures, he adds.

“We can build a more compact construction – and we calculated that in total our expenditure will be some 30 per cent less, compared with an on-shore plant.”

LNG Gorskaya has arranged project finance, securing a loan for 80 per cent of costs from its bank and seeking the balance from investors.

“We are still open to extra investors,” Mr Liats says. “And we are negotiating with a shipping company that is interested in becoming both the LNG-fleet operator and our shareholder.”

PlanningEach of the project’s three phases will add one FLNG unit able to produce up to 420,000 tonnes of LNG a year plus three 7,300m3

bunker-supply vessels.“The cost of the first stage will be more expensive than the

second or third,” Mr Liats says. “The [cost of connecting to the] gas pipeline, the docking quay and buildings for Customs, border guards, crew accommodation and so on will be approximately €250 million (US$278.3 million).”

Meanwhile, LNG Gorskaya is seeking approval from the Russian Maritime Register for the FLNG and the first three bunker-supply vessels and has submitted a Letter of Intent to

Russia’s Ministry of Transport to invest in the port for the land-based element of the project.

It says France-based GTT will provide Mark III membrane-based containment systems for the bunker-supply ships in a technology-transfer deal that GTT president Philippe Berterottière and Mr Liats signed in July.

GTT may also design and supply the materials for the floating plant’s membrane-based containment system. However, the company has not yet responded to LNG World Shipping’s efforts to verify that report.

LNG Gorskaya sees the project as a bunkering hub, supplying Russian gas as marine and transport fuel across Scandinavia and the Baltic.

“We plan to develop this port as a hub for sea-river LNG-fuelled vessels’ reloading operations,” Mr Liats says.

“We are also considering a station for high-speed, LNG-fuelled passenger ferries at the port. There is no such transport in Russia and we want to develop sea routes to other Baltic cities such as Tallinn, Kotka, Helsinki, Riga and Stockholm.

“We are open to negotiations with operators of such ferries – but we will ask them to build new LNG-fuelled ferries in Russia… We are also negotiating with German shipping companies that have ordered LNG-fuelled cargo vessels to change their route to include St Petersburg. We can offer them savings on fuel of a minimum €100 per tonne.” LNG

“WE ARE NEGOTIATING WITH A SHIPPING COMPANY THAT IS INTERESTED IN BECOMING BOTH THE LNG FLEET OPERATOR AND OUR SHAREHOLDER”

LNG Gorskaya hopes to start to export from mid-2017

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2015006.indd 1 21-2-2015 21:13:48

26 | INTERVIEW


FLNG WILL GAIN FROM ECONOMIES OF SCALE, SAYS TECHNIP

P aris-headquartered Technip is charged with delivering the world’s first two

fully fledged floating LNG (FLNG) projects.

It backs those who believe that using floating platforms will eventually achieve the economies of scale to justify more offshore production to unlock deepwater or stranded gas fields.

Having signed a framework agreement with energy giant Shell covering up to 10 FLNGs across its global gas portfolio, Technip landed the award, with Samsung Heavy Industries (SHI), for the turnkey contract for the engineering and construction of the 3.6 million tonnes a year (mta) Prelude FLNG.

Soon after, the French engineering giant followed up with another FLNG contract, this time in partnership with Daewoo Shipbuilding & Marine Engineering (DSME), clinching a

second contract from Petronas, for the 1.2 mta PFLNG1.

Technip senior vice-president business and technology offshore Jean Marc Letournel attributes these wins to the company’s decades-long track record in delivering projects involving frontier technologies.

These include LNG projects in Algeria, large oil-industry floating production, storage and offloading units (FPSOs) off West Africa, pioneering spar designs for deepwater gas fields and production infrastructure for subsea developments.

“Our approach has been to combine what we know about LNG with our knowledge of FPSOs and subsea field

developments directly [on] a floating platform,” says Mr Letournel.

Technip first worked with floating LNG production structures in the 1980s, when it designed a modularised FLNG plant on a barge destined for Melville Island in the Canadian Arctic. That project coincided with the advent of flexible cryogenic hoses.

Since then, Technip has focused on finding solutions to the technical hurdles that have hindered commercial FLNG applications far from shore.

CredentialsToday, the company has built on its strong LNG and spar credentials and on its standing as one of the

world’s largest flexible-pipe manufacturers to extend its FLNG value proposition.

Technip’s AsiaFlex plant in Tanjung Langsat in Malaysia will manufacture the flexible flowline to enable PFLNG1 to draw gas from the Kanowit field. Technip will install the flowline by the end of this year, using its multipurpose vessel Deep Orient.

Being well-placed to extend its FLNG working relationship with Shell, Technip’s framework agreement has been extended to cover the front-end engineering and design (FEED) of Woodside Petroleum’s FLNG fleet at Browse, offshore Western Australia.

There are plans to order three FLNGs that, according to one senior Shell executive, could be replicas of Prelude.

Technip senior vice-president LNG/GTL Philip Hagyard says the plug-and-play potential of FLNG hinges

Shell’s engineering partner bases its predictions for floating LNG production on its pioneering offshore experience. Huihui Chen reports

LEFT: Jean Marc Letournel: it’s about taking what we know

MIDDLE: Philip Hagyard: plug-and-play potential

RIGHT: Syed Feizal Syed Mohammad: Kuala Lumpur opportunities

INTERVIEW | 27


WorleyParsons targets near-shore opportunities

WorleyParsons is championing near-shore floating LNG (FLNG) plants to fast-track production from large-scale onshore LNG developments.

Head of global LNG business at the Australian engineering firm Paul Sullivan makes a case for using leased FLNG units with nominal capacity of 1-2 million tonnes a year (mta) to form the first trains for onshore LNG developments that will later expand.

This, Mr Sullivan told LNG World Shipping, will help energy companies to offload the project-financing risks.

WorleyParsons has been contracted by Steelhead LNG to carry out preliminary front-end engineering and design (FEED) studies and support for the permits and approval processes for the 24 mta Sarita Bay LNG project on Vancouver Island, British Columbia, Canada.

In August, Steelhead LNG signed a long-term lease with the Malahat First Nation to deploy an FLNG unit along the shoreline south of Mill Bay.

Mr Sullivan names Steelhead LNG as one of several FLNG opportunities that will enable Canada to fast-track production from proposed terminals that have yet to win export approval.

In September, Steelhead LNG contracted Bechtel and Höegh LNG to carry out a pre-FEED study for a 6 mta floating terminal off Vancouver Island.

Canada plans some 19 export terminals but has been slower than the neighbouring US to approve new projects, due to high infrastructure costs and opposition from environmentalists and First Nations groups. Some analysts see FLNG as a solution to these obstacles.

There is talk of a second Canada-based FLNG project,

with capacity 1.5-2 mta, at the Woodfibre LNG project in British Colombia.

Besides offering a flexible approach to start-up production, Mr Sullivan argues that near-shore projects avoid the risk of sloshing – potentially a problem for deepwater FLNG projects based in harsh environments that use membrane-type containment systems.

“There is not much sloshing risk in near-shore operation and the storage capacity can match onshore tanks at a lower cost,” he says.

WorleyParsons has recommended a 250,000m3 membrane tank for “one particular near-shore FLNG project [of ] 2.4 mta”, he says.

WorleyParsons is also eyeing near-shore FLNG opportunities in the Black Sea, subsaharan Africa and Brazil.

In the Black Sea, KBR is performing FEED studies on a near-shore FLNG to liquefy piped gas supplies for export. FEED on the 2.5 mta Lloyds Energy FLNG is due to be completed before mid-2016. LNG

less on the liquefaction process than on the extent to which players can apply well and flowline management and gas pre-treatment across different fields.

As the selected FEED contractor to Browse FLNG, Technip must apply identical units on different fields in different depths of water, tapping feed-gas of different compositions – even though all these factors will shape the final designs of well, flowlines and gas pretreatment.

That challenge lies ahead of Petronas, too, as it plans to redeploy PFLNG1 to a different site after five years’ use in the Kanowit field.

However, Shell and Petronas have different approaches to the fledgling FLNG segment. Shell seems to be backing mid-to-large projects on a scale to match the 3.6 mta Prelude. Petronas is focusing on building smaller units, having booked the 1.2 mta PFLNG1 and 1.5 mta PFLNG2.

Technip is keeping its powder dry. The company expects economies of scale to “drive down the cost of LNG produced from a floating platform”.

This, says Mr Hagyard, will open “a trend towards higher-capacity units, mainly to support large

offshore lean gas field developments”. He predicts that a 3.5 mta unit “will remain a good compromise for [the development of] medium to large-sized, gas-rich fields”.

FocusTechnip’s Paris headquarters is the company’s centre of excellence for FLNG. However, it is increasingly tapping resources at its offices in Kuala Lumpur, Malaysia and Perth, Australia to execute FEED, procurement and construction of the FLNGs on its orderbooks.

Paris undertook the FEED for Prelude and took the lead for FEED on PFLNG1.

However, Kuala Lumpur has graduated its capabilities from participating in the engineering, procurement and construction of Prelude FLNG to teaming up with Paris on the FEED for PFLNG1.

Kuala Lumpur will also be involved in FEED execution for Woodside’s Browse FLNG, according to Technip senior vice-president Malaysia and Brunei, Syed Feizal Syed Mohammad.

Meanwhile, the Technip office in Perth is working on the management and execution of preparatory marine works at Prelude, he said, taking full responsibility for its hook-up.

Paul Sullivan: helping energy companies to offload project-financing risks

A lthough Prelude may not end up being the first floating LNG

(FLNG) production project to enter into service, the Shell-backed scheme was the first to be sanctioned. To date it is also the largest FLNG unit to get the go-ahead.

Fitting out work on the 488m-long vessel is underway at the Samsung Heavy Industries (SHI) yard at Geoje in South Korea in accordance with a schedule that will enable LNG production to start at the appointed Western Australia offshore location in early 2017.

The great attraction of offshore LNG production is that it offers a low-cost, fast-track route to project realisation, which removes the need for a number of expensive links in the offshore-to-onshore gas/LNG supply chain.

These include separate offshore processing facilities, long high-compression pipelines to shore, nearshore works such as shipping channels and jetties and all the civil works associated with an onshore liquefaction plant and storage tanks.

Shell explains that the 200,000 tonnes of steel

required for Prelude is less than 10 per cent of the material that would have to be specified for a shore-based liquefaction plant capable of producing the equivalent 3.6 million tonnes per annum (mta) of LNG.

Despite the advantages bestowed by its offshore location, that is not to say that Prelude is independent of its shoreside links. Far from it.

The continuous operation

of the FLNG vessel 230km off Australia’s northwestern coast in 240m of water for the agreed period of 25 years will require the smooth functioning of an elaborate logistics chain that guarantees the on-time delivery of personnel and materials from two key shoreside supply centres.

Shell is using Broome, 475km south of Prelude’s location in the Browse Basin, as its base to support the

drilling, subsea installation and marine and helicopter services needed for the project. Darwin, 800km east, will be the supply base for ongoing operations and maintenance support services.

Shell has awarded the contract to manage the Darwin supply base to ASCO, an international oilfield support services group.

Now complete, the depot features 6,500m2 of warehousing, 1,500m2 of

28 | OPERATIONS


LNG logistics challenge – the teams putting Prelude on the mapWith two service bases 475km and 800km away, Shell’s FLNG vessel faces some complex supply and support challenges

N

Darwin

Kununurra

WA-44-L

100km200km300km400km500km

Derby

Broome

Port Hedland

0 100 200 300 400 500

Kilometres

OPERATIONS | 29


it climate-controlled, and 30,000m2 of storage yards and office space.

Equipment and supplies for Prelude will be trucked from this location 2km across Darwin to a marine supply base, also managed by ASCO, for loading onto offshore supply vessels (OSVs).

Shell envisages that it will need up to six roundtrip OSV voyages from Darwin to Prelude each month, deploying two of these vessels.

There will be around 130 personnel onboard Prelude during normal operations and 340 can be accommodated during shutdown periods, when essential maintenance work has to be carried out.

Where possible, Shell has selected equipment with reduced maintenance requirements and has installed spare equipment where practicable to enable normal operations to continue while the primary equipment is maintained.

The other key element of Prelude’s fleet of service craft will be three powerful tugs that Shell has designated its infield support vessels (ISVs). Primarily utilised to assist with gas and condensate tanker berthing, the ISVs will remain on station and only return to their home port of Broome occasionally for maintenance.

It will be necessary for at least two ISVs to be at Prelude at all times.

It is notable that Broome also plays host to Prelude’s dedicated search and rescue helicopter service. This capability has been utilised to support drilling activity to date but later will back up operations on the Prelude FLNG vessel.

The service, underpinned by a team of pilots, paramedics, engineers and crew, is on standby 24 hours a day, able to respond within 15 minutes during daylight hours and 30 minutes at night.

Perth-based KT Maritime Services, a joint venture between Kotug and Teekay, will supply Prelude’s three 42m, 100-tonne bollard pull ISVs. To be built to the ART 100-42 design by the ASL yard in Singapore, the tugs will be named RT Beagle Bay, RT Roebuck Bay and RT Kuri Bay.

The ISVs will feature the three separate azimuth propulsion units that comprise the Rotor Tug power system technology pioneered by Kotug as well as a RAstar hull form developed by Robert Allan Ltd. The ISVs will also provide Prelude with an important emergency response capability.

EmergencyIn the event of an emergency on board the FLNG, personnel will be able to make their way safely to temporary refuge sites on the vessel via multiple escape routes forward and aft.

Thereafter they can be evacuated from strategic low-risk locations in a controlled manner, using helicopters, freefall lifeboats and integrated chute-based liferafts.

Once evacuated, personnel can then be recovered by the ISVs. Each of these tugs will be able to

accommodate 85 people.The needs of staff on board

Prelude and at the supply bases will be met by a wide range of service providers and to this end Shell has finalised nearly 200 contracts. The work of these service teams will commence at SHI’s Geoje yard as soon as construction work on the vessel is complete.

Before the FLNG unit leaves Korea it will undergo approximately three months of sea trials off the coast near Geoje. Thereafter it will be towed to the Prelude well location off the Australian coast in an operation expected to take six weeks.

Prelude represents a major breakthrough for the industry. The vessel will set new standards in offshore performance and, to ensure these standards are met Shell has made safety and reliability its priority throughout the design and construction phases.

The company has built up a team of 250 inspectors, deployed at project locations worldwide to check that all equipment and material is delivered in accordance with the agreed specifications.

With the topsides outfitting work now well

underway at SHI, Shell points out that as many as 5,000 people, or about one-sixth of the yard’s workforce, are working on Prelude on any given day at Geoje.

The energy major has been recruiting process and maintenance technicians since 2013 and has employed more than 120 to date. Many have been deployed at Geoje to participate in the fitting-out process and to learn about FLNG layouts and procedures first hand.

This year the emphasis has been on recruiting service technicians responsible for scaffolding, rigging, crane operations, materials handling and emergency response.

Shell has also partnered with the Challenger Institute of Technology in Western Australia to develop a bespoke FLNG training programme for Prelude process technicians. Before setting off for Geoje these engineers have participated in Challenger’s foundation training programme, which takes place at the establishment’s Australian Centre for Energy and Process Training (ACEPT), the world’s first facility of this type. LNG

Logistics – delivering a unit of the Prelude turret mooring yoke to South Korea

30 | INFOGRAPHIC


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32 | PROJECTS


Woodside pushes forward with Browse FLNG

Despite speculation for several months about whether the Browse

floating liquefied natural gas (FLNG) project will go ahead, the partners – Woodside Petroleum, Royal Dutch Shell, BP, PetroChina and MIMI – have now signed two key

preparatory contracts, giving a strong indication that they want the venture to proceed.

Woodside wants to make a final investment decision (FID) in the second half of 2016, with the target to have Browse start production for 2021, when predictions indicate a global

shortfall in LNG supplies.The Technip-Samsung

consortium working on the Prelude FLNG vessel that is the prototype for the Browse development has won the front-end engineering design (FEED) contract for this project.

The FEED contract will finalise the costs and technical definition for the proposed development to enable an FID, including the timing and sequencing of FLNG deployment.

The joint venture partners are expected to press Technip-Samsung to squeeze savings out of the development costs.

Woodside chief executive Peter Coleman has described the decision to enter the FEED phase on Browse a significant step towards developing the project.

“We will continue to work with governments, Australian industry, local communities and other relevant stakeholders to realise potential opportunities from this mega-project,” he said.

Market reports suggest that contractors for the subsea work, including the drilling and the laying of pipes, will be asked to sharpen their pencils when they provide their quotes.

The cost of the project was a major obstacle to it gaining traction when its initial scope included an onshore gas plant near Broome. However, Woodside scrapped that

proposal in 2013, saying it would have cost more than A$80 billion (US$58.2 billion).

Switching focus on to an offshore processing solution has revived the project, but the need to cut costs remains an important driver, given this year’s drop in oil and gas prices.

Fat Prophets resources analyst David Lennox says Woodside will carefully examine costs and gas prices at the time of making an FID.

“They’ll push it right to the point where, if it’s not economic, they’ll walk away from it and wait for better pricing,” he said.

However, Mr Lennox added, the engineering design process is expensive, and he predicts that Woodside will ultimately go ahead with the project.

ContractsWoodside is also aiming to underpin the economics of Browse by negotiating pre-sell prices for the gas. “We continue to have ongoing discussions with a range of regional LNG customers regarding potential LNG sales,” the company says.

Further indications that Browse is on the move have come in the shape of additional associated contracts. The consortium has awarded the engineering, procurement, construction and installation job for the three FLNG vessels to be used at Browse to Technip.

Costs are under closer scrutiny but Australia’s giant offshore floating production venture is making good progress. David MacIntyre reports

Peter Coleman: entering the FEED phase is a significant step towards developing Browse LNG

The Browse partners are intending to deploy the trio of production and processing vessels that will use Shell’s FLNG technology and Woodside’s offshore development expertise to commercialise the Brecknock, Calliance and Torosa fields.

Shell has signed a conditional contract to build the hulls of the three FLNG units at South Korea’s Samsung Heavy Industries (SHI), subject to the FID going ahead.

The deal is for the units to be delivered by the end of November 2023, giving the Browse partners flexibility in the staged timing of deployment. SHI is already working on the world’s first large-scale FLNG unit, which Shell will initially deploy at the Prelude field on delivery in 2015/2016.

The government of Western Australia would welcome a go-ahead for Browse. About 65 per cent of Torosa, the biggest of the three fields, lies in waters under the state’s control and would ensure a decades-long royalty stream for the local public purse.

Western Australia has been hard hit by the collapse of the

iron-ore industry, so continual income from the offshore energy sector is crucial.

This has prompted the state government to clear the way to develop the project’s offshore gas fields by entering a key principles agreement under which the Browse partners will provide part of the gas offtake to the state instead of selling it all offshore.

This applies a domestic gas policy to an FLNG project in Western Australia for the first time – a move that will help secure the energy future of the state, according to its premier and development minister Colin Barnett.

“It also clears the way for the extension of the retention leases covering the project fields and provides the Browse joint venture with certainty as it heads towards the FEED phase,” he said.

However, the Australian Petroleum Production and Exploration Association (APPEA) has criticised the deal. Its western region chief operating officer Stedman Ellis says that the decision to force projects to reserve gas for the state’s domestic market amounts to a de facto tax.

“In what is now a new investment climate, the government should be looking to reduce the cost and regulatory burden on LNG projects if it wants to attract investment,” Mr Ellis said. “Instead, it continues to do the very opposite by imposing a gas-reservation policy that simultaneously acts as a tax on gas production and a subsidy on gas consumption.”

One thing about the deal that may give heart to the offshore maritime sector is that it contains a commitment by the Browse joint venture to developing a local integrated supply chain. Under the deal, Western Australia will receive port, marine, aviation, storage and transport services over the life of the project.

The plans include setting up a primary operations base in Perth as well as support locations in the northwest and will provide “full, fair and reasonable opportunities for local industry participation”, according to Mr Barnett. LNG

This article first appeared in our Riviera Maritime Media sister publication, Offshore Support Journal

PROJECTS | 33


Source: LNG World Shipping/Woodside Petroleum

Research: Karen Thomas

Target start date

2021

Estimated current project cost

US$40 billion

US$58 billionOriginal project cost

Length

488m

Beam

74m

Projected annual capacity

12 mta

Planned FLNG units

3

dwt

600,000

LNG production, mta

3.9

Colin Barnett: Browse FLNG will secure Western Australia’s energy future

34 | CLASSIFICATION


DNV GL’S SOLITUDE CUTS FLNG COSTS THE CLASSIFICATION SOCIETY HAS DEVISED AN UNCREWED FLNG UNIT TO LOWER COSTS AND REMOVE HUMAN ERROR

Variety is the spice of life, certainly in the case of offshore LNG, whose diversity and newness present

both an opportunity and a challenge to shipowners, ports and customers. And that is where classification societies see an opportunity to help.

DNV GL is working across the entire gas value chain, from offshore exploration and production to onshore downstream gas markets, says the class society’s oil and gas chief executive Elisabeth Tørstad.

A key focus is floating LNG (FLNG) production, floating storage and regasification units (FSRUs), onshore terminals and shipping companies involved in the supply chain.

“On the receiving side, we are seeing more LNG come to market and there is even more to come,” Ms Tørstad says.

Because the technology that FSRUs deploy is new and non-standardised, projects get complicated. No one technology dominates the market.

That diversity of technical solutions and approaches presents a challenge. DNV GL says it is dealing with enquiries relating to safety and risk assessment for FSRU import terminals and questions about transfer technology for such projects.

“Every project has some element of new technology and we will carry out an overall risk assessment,” Ms Tørstad says.

“The industry also needs different technical solutions to deal with different gas compositions and variations of the gas that the terminal needs to handle – the regulatory requirements and implications of gas interchangeability.

“In western countries, and also in Asia, we are seeing more short-term contracts, smaller contract volumes and smaller barges used for receiving terminals where there

is a need for technology that supports the flexibility in the market.”

Spot trading of LNG globally grew to 27 per cent last year and is set to rise.

DNV GL worked with Golar LNG on the first FSRU it established in Brazil, supporting its work on the technical and safety issues, and helping the project to meet its regulatory requirements. It is also working with engineering companies and equipment suppliers from all over the world on FSRU projects based in Asia and Europe.

ProductionOn the production side of the offshore LNG business DNV GL has worked on a variety of large projects, including safety reviews and fire and explosion modelling for FLNGs for operation in Malaysia, safety and technical assessments, including the review of offloading and explosion modelling for FLNG units proposed for operation in Brazil, and safety assessments for FLNG units for operation in Australia.

“We are now seeing development of these large FLNG projects,” Ms Tørstad says. “It’s still a limited number that have reached approval stage but we firmly believe that more will come. DNV GL has already been working with several of the fields that have not yet been approved, as they get ready to make final investment decisions.”

The main competition comes from onshore terminals and FLNG will typically be relevant only for projects where it is not feasible to take the product to shore. And as technology matures, there are high expectations of project cost optimisation of floating versus land-based facilities.

Ms Tørstad expects the coming years to support a range of LNG projects, from large and complex FLNG to onshore terminals.

“There is definitely logic to developing

Elisabeth Tørstad: proposed LNG projects need efficiency gains to cut costs to gain approval

CLASSIFICATION | 35


both, and local governments and authorities will obviously play an important role in selecting which approach, not least in terms of support to local industry and economy,” she says.

More than 100 million tonnes per annum (mta) of LNG projects is under construction, much of it in the US and Australia.

“These big projects are slowly coming to market, but they will materialise,” she says. “Many that are yet to reach final investment decision will add to the growing global capacity picture if they can achieve efficiency gains that bring project costs down.”

Research and developmentIn addition to classification and technical advisory services, DNV GL is working to devise solutions for offshore LNG. The company channels 5 per cent of its revenues into research and development.

“We have a long history of investing in R&D, and started working on and promoting LNG as far back as the 1950s,” Ms Tørstad says. “We have the expertise and the testing facilities that are tailor-made to all parts of the gas-supply value chain.”

One of DNV GL’s most audacious projects has been to generate a concept for an uncrewed FLNG unit that deploys existing technologies and still improves safety while delivering an annual 20 per cent reduction in operating expenditure, according to the class society, which adds that these benefits require only a moderate increase in capital expenditure.

One of the main barriers to entry into the FLNG market is its high start-up and operating costs and banks’ reluctance to finance such projects.

DNV GL named its concept Solitude under an extraordinary innovation project that aimed to tackle cost barriers while upholding rigorous safety and environmental standards.

“By changing the focus from maximum efficiency to maximum reliability and selecting robust processing options with built-in redundancy, we were able to develop a solution that ensures production levels and boosts the economic viability of an FLNG project,” Ms Tørstad says.

“Existing frontier oil and gas projects have resulted in tremendous technological developments, particularly in the subsea realm, and Solitude draws on this.

“Operators are already controlling subsea installations and simple, fixed offshore installations from shore. Given the ongoing advances in autonomous systems and remote operations, unmanned offshore installations are a natural development over the next few decades.” LNG

ANATOMY OF A SHIPPING CONCEPT: SOLITUDE

The brief DNV GL wanted to devise a concept that is easy to maintain. Solitude’s

design features robust processing equipment with built-in redundancy that

is modularised. Rather than involving large items, most topside failures come

down to small units, which are easy to replace. The most common larger

topside failures involve compressor strings. DNV GL’s Solitude design allows

these to be broken down into smaller submodules and mounted on their

own skids, making them easy to remove and maintain.

Power High-maintenance gas turbines can be replaced by fuel cells to improve the

reliability of power generation and to reduce the unit’s environmental footprint.

Equipment Modularised, monitored from shore and inspected and maintained by robots

that move along rails installed alongside each process train on the topside.

Wireless sensors feed information to the condition-monitoring system,

eliminating the need for crew during normal operation.

Crewing Automated systems will prepare the topside to ensure a safe working

environment for crew to board the vessel to carry out large-scale maintenance

work. DNV GL has also developed a concept for a support and accommodation

vessel and docking when Solitude needs more extensive work.

Intelligence Advances in sensor technologies, improved offshore-onshore communication

and connectivity, new software tools and big data will enable the offshore

industry to find new ways to collect, store and process data to detect faults,

plan repairs and carry out routine maintenance.

Realisation Analysts predict that a second wave of FLNG projects will come to market

around 2023, once the energy sector recovers from the current slump and

commits to new investment. Whether the second wave will include uncrewed

FLNG units remains to be seen. So, for now, Solitude remains a concept,

albeit one that includes many solutions that are already on the market.

Only a few FLNGs have reached approval stage but more will come, says DNV GL

36 | OPERATIONS


Tandem solutions for open-sea transfersTandem offloading of FLNG vessels is edging closer to reality as a result of intensive research and development work

The next technology challenge for the offshore LNG industry to master is the transfer of cargoes from a permanently moored floating vessel to a shuttle tanker positioned behind in the tandem, stern-to-bow configuration.

Tandem offloading arrangements are perceived to be safer than side-by-side transfers due to the larger distances between the vessels, a critical consideration in less hospitable waters.

It is estimated that tandem LNG transfer operations can continue to be carried out safely in sea states with wave heights of up to 5m, whereas the suggested upper wave height threshold for side-by-side offloading is 3m.

Despite the promise of the tandem configuration for cargo offloading in open seas, such operations require the development of new transfer technologies.

The tandem LNG transfer concepts that have been put forward are more elaborate versions of designs utilised in side-by-side transhipments and fall into one of three categories, ie metal loading arms, composite hoses and corrugated metal, vacuum-insulated pipe-in-pipe arrangements.

StudiesAlthough much study work has been carried out, as yet no tandem transfer system has been specified for a floating LNG (FLNG) project.

All offshore LNG terminal projects launched to date, whether utilising FLNG vessels or floating storage and regasification units

(FSRUs), rely on side-by-side transfers. Most FSRUs are positioned on dedicated jetties either shoreside

or in nearshore waters, so the wave height issue is not a factor and side-by-side transfers are eminently suitable.

Yet even FSRU Toscana, stationed 22km off the Italian coast, utilises the side-by-side transfer mode, made possible through the use of specialist loading arms mounted on the vessel’s main deck. The receipt by the FSRU of its first cargo in September 2013 marked the first LNG offloading operation at a permanently moored floating unit in an offshore location.

There are no FLNG production vessels in service as yet but seven such projects, involving either newbuildings or conversions, have been launched.

The vessels are earmarked for operation in relatively benign marine environments and, once again, the schemes will rely on specialist, deck-mounted loading arms to enable side-by-side LNG transfers.

Side-by-side offloading is the preferred option in more benign metocean conditions because it not only utilises existing, proven technology and procedures but also enables the use of so-called standard LNG carriers with a conventional midship manifold for the cargo transfers.

ReliabilityThe option has shown its ability to provide a safe and highly reliable service through hundreds of ship-to-ship LNG transfers involving FSRUs.

Several floating LPG production and storage vessels in service also routinely carry out side-by-side offloading operations.

The choice of the side-by-side option in LNG projects to date is providing additional time for the industry to perfect tandem transfer technologies.

In the course of normal operations, weather-related and other delays are more critical for FLNG vessels than FSRUs because of the adverse economic impact of shutting down production.

The need for an FLNG facility to guarantee high levels of cargo transfer availability, sustained for periods of 24-30 hours at a stretch, increases the attractiveness of tandem offloading operations in certain open seas project scenarios.

Oil floating production storage and offloading (FPSO) vessels have been a feature of the offshore energy industry for five decades.

Oil is handled at ambient temperatures and pressures and, as such, is an easier cargo to deal with than LNG.

Because the technical challenges are not so great and operational

The HiLoad unit attached to the LNG carrier is linked to a Sevan Marine concept cylindrical FLNG unit using floating hoses

OPERATIONS | 37


uptime can be maximised in harsh, multidirectional weather conditions, tandem offloading is the favoured cargo transfer method for oil FPSOs.

Experience gained in the oil FPSO sector has much to offer developers of future FLNG projects.

Keeping the LNG shuttle tanker properly on station will be critical to the success of any tandem FLNG scheme and, of the methods available, dynamic positioning (DP) offers the most promising solution to the challenge of offloading LNG in exposed locations where harsh, multidirectional weather conditions can be a factor.

Although oil FPSO experience and recent model test studies suggest that a shuttle tanker with DP could handle sustained transfers in significant wave heights of 3 to 5m, DP tandem offloading for LNG is still in the concept phase and more work needs to be done to prove all aspects of the technology.

The DP system on the shuttle LNGC works to keep the ship’s bow aligned with the FLNG vessel’s stern by controlling the propeller, rudder, azimuthing thrusters and tunnel thrusters.

The downside of the DP method is that all the shuttle tankers utilised by the project must be designed for bow loading and provided with a DP capability, reducing opportunities for chartering conventional LNGCs to lift spot cargoes.

SolutionOne possible solution to this problem is to use a HiLoad transfer unit fitted with its own DP thrusters as part of the FLNG terminal arrangement.

HiLoad LNG, now part of Sevan Marine, has been developing its offloading technology for more than 10 years and is promoting its use for tandem LNG transfers to conventional LNGCs.

Using four thrusters provides the HiLoad unit with a DP2

station-keeping rating and Sevan points out that the technology also helps reduce LNGC rolling movements and, thus, sloshing loads.

Cargoes are transferred from the FLNG vessel to the HiLoad unit via floating hoses and from the HiLoad structure to the LNGC’s midships manifold by means of LNG loading arms fitted on the HiLoad’s top deck.

Because there is no relative movement between the LNGC and the HiLoad unit to which it is attached, standard loading arms can be utilised. Sevan is now proceeding with the final qualification of the HiLoad’s critical LNG components.

While the composite hoses utilised in side-by-side LNG transfer operations are relatively short in length and held in an aerial arrangement between the two vessels, hoses specified for tandem offloading to an LNGC’s midships manifold could be upwards of 300m in length. In such cases an aerial configuration is not an option.

Investigating the challenges, a study team at Maritime Research Institute Netherlands (Marin) points out that filling a 170,000m3 LNGC in 17 hours would require two 16in LNG hoses and one 16in vapour return line working at 3 bar (300 kPa) export pressure.

Either a floating or submerged hose would be possible but, as the Dutch researchers state, it will be necessary to achieve, through further study, a better understanding of the real performance of the new hose or pipe solutions in a fully dynamic offshore environment.

To prove the viability of the new tandem transfer technologies under consideration, Marin advocates supplementing model tests with feedback from real operations as well as combining hydrodynamic models with full mission bridge simulation.

Such an approach enables engineers to become more involved with operational considerations while mariners will gain a better understanding of the engineering challenges. LNG

Tandem offloading research includes work by FMC Technologies on ATOL offshore articulated arms

T he arrival of the 170,000m3 floating storage and regasification unit

(FSRU) BW Singapore at Ain Sokhna in late September has reinforced the emergence of Egypt and neighbouring Jordan as significant bright spots in global LNG demand.

The Samsung-built BW Singapore joins Hoegh Gallant as the second FSRU-based receiving terminal at the Egyptian Red Sea port. The Höegh LNG vessel was positioned earlier this year at Ain Sokhna, 55km south of the Suez Canal’s southern entrance and is Cairo’s principal port.

Aqaba, Jordan’s Red Sea port, also commenced LNG imports earlier this year, making use of Golar LNG’s Golar Eskimo. The 160,000m3 FSRU docked at the rapidly constructed, purpose-built jetty in the harbour in May.

Fast trackThe state-owned Egyptian Natural Gas Holding Company (EGAS) has chartered the 170,000m3 Hoegh Gallant for five years. The contract is expected to generate for Höegh LNG average annual earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$40 million.

State-owned Egyptian Natural Gas Holding Company (EGAS) has signed LNG-import deals with several companies covering the delivery of 76 cargoes to Hyundai-built Hoegh Gallant over 2015-2016.

Egypt needs the incoming LNG imports, valued at an estimated US$1.5 billion, to meet burgeoning domestic demand for gas in the power and industrial sectors.

EGAS will supplement the Hoegh Gallant imports with the purchase of 55 cargoes for delivery to BW Singapore through December 2016.

BW Singapore, which has the capacity to regasify up to 5.5 million tonnes per annum (mta) of LNG and was placed in service within five months of EGAS placing the five-year charter deal, marks the entry of BW Gas into FSRU operations.

Jordan has also made arrangements to secure its medium-term gas supplies. The country's National Electric Power Company (NEPC) awarded a purchase tender this week for up to 78 cargoes for delivery to Golar Eskimo over the 2016-2019 period.

Samsung-built Golar Eskimo, which is on a 10-year charter to NEPC, with an option to extend, is able to regasify LNG at a rate of up to 5.5 mta.

ReversalFive years ago Egypt was rapidly becoming a leading LNG exporter, with worldscale liquefaction plants on the Mediterranean coast at Idku and Damietta. Opened in 2004, the 5 mta Damietta facility is operated by Union Fenosa Gas and BG runs the 7.2 mta Idku terminal, which was commissioned in 2005.

However, more recently the country, with its 90m population, has faced difficulties producing enough gas to meet domestic demand due to the interruption of exploration and production that resulted from the its outstanding debt to foreign oil and gas companies. The Arab Spring uprisings in 2011 only exacerbated the situation.

Following peak output in 2009, Egypt’s gas

production began to wilt. Union Fenosa Gas halted LNG shipments in 2013 and BG declared force majeure on Idku exports in January 2014, citing “ongoing diversions” of its gas supply to the local market.

Trading housesEgypt also highlights the increasingly important role that the international trading houses play in the LNG market. Although they are an established and significant force in the oil and commodities sectors, traders have only recently emerged as significant suppliers of LNG.

EGAS awarded Trafigura with 33 of the cargoes to be delivered to Hoegh Gallant in 2015 and 2016. According to Poten Partners, this deal has made Trafigura the top independent commodity trader in LNG.

With Egypt added to its sales to Mexico, Argentina, Kuwait, Dubai and a number of Asian buyers this year, Trafigura is set to post a traded volume of close to 3 mta in 2015.

38 | REPORT


FSRUS OPEN THE RED SEA TO LNGJordan and Egypt have joined the LNG-importers’ club, using floating storage and regasification units. Mike Corkhill reports

BW Singapore is now delivering LNG to Egypt

REPORT | 39


Other contracted suppliers to EGAS include the traders Vitol and the Noble Group. Both companies are providing seven cargoes, the Noble complement including the Hoegh Gallant commissioning cargo in March 2015 and the first commercial cargo, delivered to the vessel a month later.

Trafigura, Vitol and Noble are also amongst the suppliers that EGAS has contracted to supply the BW Singapore cargoes. The three traders will supply the bulk of Egypt's needs through to the end of 2016.

Politics and LNGEgypt has Africa’s third-largest reserves of natural gas but is unlikely to resume LNG exports soon.

Although Eni’s August 2015 announcement of a major gas find in the Zohr field off the country’s Mediterranean coast holds the promise of eventual self-sufficiency and gas exports, for the moment domestic gas demand is rising fast.

Depending on the availability of gas, there are opportunities to deliver gas amongst countries in the Red Sea region, notably Israel,

Egypt and Jordan, by pipeline.However, LNG imports

offer security of supply and at the moment even Israel is making use of an FSRU off its Mediterranean coast until its offshore gas resources are developed and piped ashore.

Prior to the arrival of Golar Eskimo, Jordan had been forced to switch to burning diesel fuel in its gas-fired power stations due to repeated terrorist attacks on its Arab Gas Pipeline (AGP) link with Egypt, Syria and Lebanon.

Jordan is even more reliant on imports to meet its

gas needs than Egypt. Gas accounted for 40 per cent of Jordan’s primary energy consumption in 2009 but this dropped to 12 per cent in 2011 when attacks on the AGP connection with Egypt disrupted supply.

So, LNG has come to the fore in the Red Sea gas scenario in the past six months. For the next five years Hoegh Gallant, BW Singapore and Golar Eskimo are set to be the busiest FSRUs afloat. LNG

BW Singapore170,000m3

Owner: BW ShippingAin Sokhna, Egypt

5.5 mtaChartered to 2020

Golar Eskimo160, 000m3

Owner: Golar LNGAqaba, Jordan


Hoegh Gallant170,000m3

Owner: Höegh LNGAin Sokhna, Egypt


EGYPT

JORDAN

C larksons estimates that by 2019 global floating LNG (FLNG) vessel capacity will reach 44 million tonnes per year (mta), or about 7.5 per cent

of the industry’s total capacity.By April 2015, the Petronas PFLNG1 was 91 per

cent complete and expected to begin production in March 2016. Shell’s Prelude is set to enter service in 2017 and the Murphy/Petronas PFLNG2 is due to be operational in 2018.

Pacific Rubiales’ floating liquefaction regasification and storage unit (FLRSU) should also enter into service in Columbia next year. And Mitsui, MOL and Marubeni will invest in Dutch company Tartaruga MV29 BV (or MV29), established by MODEC to deploy a floating production, storage and offloading (FPSO) unit for Brazil state oil company Petrobras.

There is a growing need for clear technical guidelines for construction and survey of offshore facilities, requiring classification societies to participate in the early stages of design and development of new offshore technologies. So ClassNK has recently formed a standalone natural resources and energy department to sharpen its focus.

Team members include experts in the fields of LNG and offshore, machinery, and material and equipment, and senior researchers and top NK managers from around the world. The department conducts joint R&D projects with offshore-industry partners and establishes design guidelines, plan approvals, surveys and operational support.

It oversaw the recent approval-in-principle (AIP) of the world’s first H

2/CO2 FPSO design, developed by MHI and Chiyoda Corp.

The team also developed a MODEC/TEC Micro-GTL (gas-to-liquid) plant on an FPSO, applicable to the development of small to

medium-sized gas reserves, or floating-GTL. The first demonstration unit was built and tested at the Petrobras Lubnor refinery in Fortaleza.

The department developed ClassNK’s Guidelines for Floating Offshore Facilities for LNG/LPG Production, Storage, and Offloading, released in 2011, which now includes FSRUs and FPSOs.

ClassNK is also committed to more forward-looking technologies.

As part of a joint R&D project led by MODEC and Toyo Engineering, it contributed to the risk and safety assessment of the LiBro FLNG concept, seeking to increase the scope of offshore gas development, especially for small and mid-size fields.

ClassNK recently granted approval to the new 28AHX-DF dual-fuel engine, developed by Niigata Power Systems for offshore support vessels and tugs. This is the main engine on the new LNG-fuelled tug Sakigake, delivered from Keihin Dock C in August to owner NYK Line.

With an LNG cargo tank capacity of 3,500m3, Sakigake can be used for short-distance operation, for example transporting LNG from Tokyo Bay to Hokkaido, covering some 970km at a speed of 13 knots and unloading all its cargo in around three hours.

Since 2010, ClassNK has supported more than 30 practical R&D projects related to LNG as a fuel, including technology developments and safety assessments for LNG fuelling and bunkering and has spent more than US$10 million on such programmes.

So ClassNK is taking a comprehensive approach to supporting developments in the offshore sector. This department allows us to combine our experience and expertise in oil and gas with highly sophisticated and targeted R&D to further grow and develop the offshore sector. LNG

40 | VIEWPOINT


ClassNK natural resources and energy operating officer and general manager Hayato Sugo explains why his department is overseeing FLNG design, technical and service support

Hayato Suga: ClassNK is committed to forward-looking offshore technologies

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Offshore LNG 2015