Floating LNG (FLNG) has been conceptualised by those with the vision to innovate and audaciously conceptualise creative solutions in order to get things done better.
The development of FLNG has come about by the need to have a "mini LNG plant" in remote offshore fields to maximise the extraction but minimise the cost.
This offshore facility is an idea borne out of the adage "necessity is the mother of invention".
While onshore LNG facilities are quite common, features near gas-rich offshore sites, floating LNG facilities are still a rarity and at its nascent stage. But with more discoveries of gas in offshore locations (some of which are located hundreds of kilometers away from the shore) the requirement for innovative solutions and new equipment to extract energy from these sites in the most economical manner has heightened. Hence, the birth of the idea of FLNG – a great solution for areas rich with gas but poor in infrastructure.
The growing global thirst for energy and the rise in the demand for clean, alternative energy has driven gas companies to search for gas in new locations including offshore. The logic of having FLNG stems from the daunting technical challenge and the high cost faced by gas majors to extract gas from far-flung offshore locations and to build pipelines to connect remote offshore locations and onshore plants. In essence, having a floating facility to cool and store gas before transferring it to onshore facilities is an efficient solution to overcome the technical and financial challenges of producing gas in faraway offshore locations.
The ABC of FLNGs
At the risk of stating the obvious, FLNG is essentially the gas industry's version of the oil industry's FPSO. Shaped like ships, just like FPSO, an FLNG has the features of a vessel and, as such, is governed by some common shipping principles and mechanics in its design and operations. Like FPSO, FLNG are connected to gas fields at the bottom of the ocean using sub-sea gas riser and pipelines.
FLNG also features risers and buoy connections and a mooring system at its bow to enable it to stay anchored. An FLNG and oil FPSO can even be connected to a production line by way of risers through which gas and crude flow to the respective vessel.
It is just as well that only "floating" is represented in the term "FLNG". If one were to include all its features and the activities that take place on an FLNG, the acronym FLNG commonly used to describe this miniature gas plant would not qualify as its short form! Among the multiple functions of FLNG are production, liquefaction, storage and offloading of gas. One can imagine the engineering smarts and technical know-how required to cram the many features on a small working platform to enable an FLNG to carry out all these activities and to carry them out efficiently.
The devil in the details
Those not familiar with FLNG might be surprised to learn that the concept for FLNG was first mooted three decades ago. Thirty years on, the world is still waiting for the first FLNG. However, we are getting closer to seeing the pioneering FLNG being realised.
As stated earlier, the principle objectives of FLNG to minimise cost and maximise production. A combination of inventiveness, high-end technologies and huge investments is required to fulfill these objectives.
Given this, it should therefore not come as a surprise to learn that FLNG is pioneered by an oil major which has the knowledge and deep pocket necessary to come up with this ingenuous solution. At the forefront of FLNG technology is Shell which has been involved in offshore operations for decades. Thanks to its years of experience in the field of offshore drilling, which include some of the deepest parts of the oceans, Shell is poised to make a breakthrough in offshore gas exploration and production by coming up with the world's first FLNG.
The stage is all set for this groundbreaking innovation to be realised. Earlier this year, it was reported that Shell would issue tender to develop its much-awaited FLNG. In July, Samsung Heavy Industries was reported to be commissioning engineering design for the FLNG. By the look of things, it would not take much longer before the first FLNG makes its debut. However, the current credit squeeze might just throw a spanner in the works in its development and delay it being brought into play.
From its conceptual stage of design to its eventual deployment, FLNG technology is anchored on the principles solving problems, leveraging existing technologies and coming up with innovative solutions. FLNG incorporates state of the art containment system, miniaturisation of components and systems, and cutting-edge technologies fitted on what is essentially a small space. It also features state-of-the-art-loading and offloading systems that can get the job done in the most technically challenging fields in very taxing environments. With all these features, FLNG is poised to contribute significantly to transform the offshore gas industry into a new high-tech level.
FLNG designs are driven and determined by the fields they operate in. As FLNG comes at a considerable cost to build, much research and development has to go behind its design before it is commissioned and deployed. The type of feedgas available, the state of the sea, the presence of crude oil and other physical characteristics of the site are factors which determine the design of the FLNG.
The case for FLNG
FLNG provides a more environmentally friendly option than onshore gas platforms. For one, the deployment of FLNG avoids the release of gas to the atmosphere that normally occurs when firing and re-injecting gas on onshore platforms. FLNG also spares disturbances to the ocean bed by eliminating the use of long and bulky pipelines.
The risks posed by the field are also significant in determining the features and composition of the FLNG. Particular attention must be given to minimise environmental damage in FLNG operations, such as reducing carbon dioxide emissions, preventing gas leakage and avoiding using materials which are environmentally unfriendly.
Prior to the volatility of oil energy prices this year, the outlook for the oil and gas sector was very bright indeed. The International Energy Agency forecasted in 2004 that global demand for energy would double between 2005 and 2030. To accommodate this projection, global gas production would need to be increased five-fold. Many analysts in the sector projected that as demand for energy and gas in particular continues to grow in the years ahead, and as the search for gas goes further offshore, the demand for FLNG would rise in tandem.
Several other factors were listed as potentially increasing the demand for FLNG as an alternative solution to onshore gas plants. These include the lack of suitable sites to construct gas plants onshore to receive gas drilled offshore and pressure on the energy supply chain to deliver more gas to an ever hungry global market. These factors were expected to elevate the importance of FLNG as a viable alternative solution to the more expensive onshore gas facilities.
The bullishness of the oil and gas sector, on the back of voracious global demand, of only what seems a short while ago, has turned bare in the blink of an eye. The hike in energy prices, in what is termed by industry analysts as a super spike, has slammed the brakes on the growth momentum of the energy sector. Global demand for energy, including gas, has dramatically slowed as consumers and industries, reeling from historical high energy prices, cut down consumption and production.
In addition to the high oil prices, the recent crash of the financial markets is also threatening to sour the mood in the energy sector. The credit crunch from the financial fiasco on Wall Street has affected many industries. The capital-hungry offshore energy sector is no exception. While the crisis has not yet become severe enough to put a halt on offshore gas exploration and production, it is sufficient to get a lot of people in this business worried. Amid rising prices of raw materials, commodities, labour cost, support services and equipment, gas majors have another headache in their hands: where to obtain the money to finance costly structures like FLNG. As banks become more risk averse and cautious, industry players have to work harder to raise not only adequate financing but the most cost-effective financing to fund their orders of FLNG for their offshore projects.
These developments call for earlier optimism in the energy sector to be tampered with a dose of reality. While the demand for oil and gas will continue to be high, given the world's rapacious appetite for hydrocarbon energy, such negative developments can easily derail the momentum of the development of FLNG.
Hope and opportunities float
It is anybody's guess to what extent will the global economic recession be, or how much it will impact the oil and gas industry. However, should the markets and economies get back to even keel, it could be expected that the search for offshore energy will pick up pace again. As business activities pick up, consumer confidence improves and money becomes available again at reasonable rates, demand for energy will be on the up. In addition, as demand for new sources of energy and cleaner alternative energy increases, we can expect the demand for FLNG to rise as well.
If this materialises, we should see new features and innovative technologies on be introduced into FLNG. Its efficiency and productivity should also increase in tandem, as gas majors endlessly pursue economies of scale and cost effectiveness to produce the most volume at the lowest cost. There should be improvement after improvement, innovation after innovation that will elevate the performance of FLNG and enable it to be deployed in offshore locations farther and harsher.
This inevitably will demand greater care for safe operations to ensure that workers who work in remote locations and unforgiving conditions offshore are protected. It is easy to be dazzled by the amazing technologies and fancy equipment involved in offshore gas operations like FLNG but let's not forget about the brave and hardworking men and women who work on the platforms and vessels which make gas extraction out at sea possible. Being out at testy seas for weeks on end, their welfare and safety need to be diligently taken care of to enable them to get the job done and done well.
The intense spotlight on environmental matters will put pressure on gas companies to operate based on the clean and green philosophy at all times. Although the deployment of FLNG at offshore sites is more environmentally friendly compared to non-floating offshore gas operations, it is not without risks to the marine environment. There are risks emanating from potential leakages and emission of harmful gas and worksite accidents. As such, operators and players must pull all the stops to ensure minimal impact to the environment in working with FLNG.
The advent of FLNG stands testimony to the spirit of inventiveness and creativity of the industry players. No doubt that if they continue to display and hone their innovative, entrepreneurial spirit and can-do attitude that have given borne to FLNG, this wonderful technology will enjoy a quantum leap in features and performance that will enable it to facilitate the extraction of gas from challenging offshore fields in the years ahead.
Nazery Khalid
Senior Fellow, Centre for Maritime Economics and Industries of the Maritime Institute of Malaysia.