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Floating LNG - a revolution for gas production?

Thursday, April 12, 2012

There are many offshore gas fields which can't be produced using conventional means, due to the cost of piping it to a market - but if you could liquefy it offshore and put it in tankers, many things become possible. Shell is developing the world's first such project

There are plenty of gas resources around the world which can be exploited using floating liquefied natural gas (FLNG) technology - including in North West Norway, around the entire coastline of Africa, offshore Brazil, and around Indonesia, and offshore Vancouver.

All of these gas fields haven't proven economic to produce any other way, because of the cost of building a pipeline either direct to a market, or building a pipeline to a land based liquefaction plant.

But if the gas can be liquefied offshore, then the liquid gas can be pumped into a LNG tanker and taken anywhere.

The equipment for liquefying gas is very large and complex, which is why the idea of installing it on a vessel has been considered too challenging until now, although many people have considered it.

But Shell believes that it can do it and the time is right to start. It has started construction on the world's first ever floating liquefied natural gas (FLNG) facility.

It is known as 'Prelude,' to be cited 200 to 250km offshore Australia.
It will produce 5.3m tonnes of LNG (3.6mtpa) condensate (1.3mtpa) and liquefied petroleum gas (0.4mtpa) per annum.

Three different types of ships will collect cargo from the facility - LNG carriers, LPG carriers and condensate carriers (oil tankers).

Shell made the final investment decision for Prelude on May 20 2011, and Samsung in South Korea started work building the facility soon after that. First production is expected in 2017.

The facility will be 488m long and 74m wide, the largest floating offshore facility in the world. It will provide 350 direct jobs.

Shell has started recruiting staff who will work on the facility - they will be sent to other LNG projects around the world to get experience before the Prelude project starts.

It has already spent over 1.6 million man hours on the front end engineering and design (FEED) stage of the project. There have been 500 to 600 staff working on the project so far, including from Shell's deepwater team in Houston, and regulatory team in Australia, and LNG technology people at the company Technip in Paris.

By having a floating LNG facility rather than putting it on land, the cost and environmental impact is lower, because you don't have to have a pipeline going to land, or build jetties for tankers to come and collect the LNG, and dredge the seabed.

The total amount of physical materials required for the offshore plant works out at 50 per cent less than having it onshore, because there is no requirement for a jetty (for vessels to moor up to) or pipelines.

Getting it going

Floating LNG has a long story. Engineers have been talking about the idea of FLNG since 1980, and started taking it seriously as an idea around 1996. But this is the first ever confirmed project.

'We are very excited about FLNG,' said Neil Gilmour, manager FLNG with Shell. 'We've done something for the first time in the industry.'

The project needs a large amount of technology and technology integration, he said. 'It's a unique combination of established technologies.'

It needed a lot of safety studies, looking at the effects of sloshing (liquids moving around in the tanks) on the stability of the vessel.

There are complex relationships between the vessel itself (to float and hold the cargo), the facility on its surface, the tug boats which move it.

Altogether, Shell expects the safety, reliability and availability to be 'on par' with land facilities, he said.

There are some pieces of LNG equipment which have never been used offshore before. 'There are challenges with that,' he said.

It helps that Shell is involved in all aspects of the gas supply chain. 'We can understand everything from the molecule in the rock to the customer,' he said.

There are advantages in making the facility so big, in that it can be more stable on the ocean, and safer. 'The stability of the vessel itself is greater because it is so large,' he said.

The design came under enormous scrutiny, both within Shell and by Australian authorities, which Mr Gilmour said he found 'hugely gratifying'.

Future projects

The Prelude FLNG facility 'will be the first of many,' Mr Gilmour said.
'We didn't set off just to build one.'

'We've got to get Prelude right - within budget and on schedule,' he said.

Once the first project is built, it should be possible to find ways to improve construction, and get more companies involved. 'We're open to business in terms of new partnerships,' he said.

'I hope in 10 years time there will be a large number of FLNG projects,' he said.

Shell plans to make projects as standard as possible. 'The next project will be 90 per cent identical,' he said. 'Subsequent projects will get faster and cheaper.'

Future projects will be easier to plan, because Shell will have a good knowledge of what the costs are going to be.

Shell already has a 'master' agreement with Samsung for further projects.

The next planned project is called 'Sunrise' and will be between Australia and East Timor, and needs approval from the governments of Australia and East Timor. Another project is planned in Indonesia.

'We have 'new business development' - (NBD) discussions going on around the world,' he said.

Projects will only go ahead if they can produce LNG at a cost which is comparable with existing LNG projects.

Associated Companies
» Royal Dutch Shell plc
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