Using FLNGs to ‘fast-track’ the monetisation of gas resources
15 Jan 2021
Easier to finance and more flexible than traditional onshore liquefaction infrastructure, FLNG technology can ‘fast-track’ the monetisation of gas resources
One of the key advantages of utilising floating LNG (FLNG) technology over permanent shoreside infrastructure to produce LNG for export is its ability to ‘fast-track’ a project, quickly monetising associated gas resources.
Speaking at Riviera Maritime Media’s LNG Ship/Shore Interface Conference in November, Exmar managing director for infrastructure Jonathan Raes emphasised that point, noting that deployment of an FLNG solution could take as little as six months, from customer contract to commercial acceptance, if all the right conditions are in place.
While a newbuild FLNG solution could be available in slightly more than three years, Mr Raes said using an existing FLNG vessel, such as its barge-based Tango FLNG, that is commercially available could result in rapid commercial development. “This could be deployed in a timeframe of less than six months, if the gas specification, and the relative mooring infrastructure – a jetty – is already in place,” he said.
Another advantage of FLNG technology is that it mitigates risk because it is built by a skilled workforce in a shipyard or fabrication facility. By contrast he pointed out: “A greenfield development can imply a certain risk, as we have seen with liquefaction projects around the world.”
“You can unlock new gas reserves around the world on a very fast-track basis - in less than six months”
Mr Raes said FLNG technology is ideally tailored around smaller, so-called ‘stranded’ gas reserves. “You don’t need to necessarily have these mega-gas reserves to monetise the facility. You can really unlock the smaller gas pockets.”
The technology also lends itself as a transitional solution he said: “You don’t need to have necessarily a term of 20 years to unlock the gas.”
Key considerations
In his presentation, Mr Raes made note of the key technical and economic factors when considering the development and commercial viability of a new liquefaction project. One of the most important of these is the availability of cost competitive gas, he said.
“Due to its limited footprint and redeployment possibilities, Exmar’s FLNG vessel can unlock smaller gas; this allows investors to monetise cheap gas from stranded fields and associated gas (flaring).
A second consideration involves the composition of the natural gas. All natural gas is not created equal. While the largest component of natural gas is methane, other components include heavier hydrocarbon liquids that are commonly referred to as natural gas liquids (NGLs). NGLs include ethane, propane, butanes, and natural gasoline (condensate). These heavier hydrocarbon liquids are removed from the natural gas stream. Gas processing, either pre-treatment or dehydration, adds cost and complexity to the project.
Mr Raes said if the gas composition is not properly balanced it could have an impact on the viability of an FLNG project.
A third consideration is the availability of infrastructure. This starts with location; an FLNG project should be cited close to an existing natural gas pipeline infrastructure, he said. He cautioned that a developer should “avoid having to build hundreds of kilometres of new pipelines – which adds additional cost to the project, jeopardising its potential viability.”
Mooring infrastructure and suitable metocean conditions – wind, wave and climate – must also be factored into a project. He noted the need to build a breakwater, for example, or a new jetty or special mooring solution, could drive up the cost of development significantly.
Jonathan Raes (Exmar): “You don't necessarily need to have these mega-gas reserves to monetise the facility” (source: Exmar)
FLNG vessel experience
Selecting the right FLNG technology is critical, noted Mr Raes. He said past projects had reached production costs more than US$2,000 per tonne of LNG produce because of significant cost overruns.
With its barge-based Tango FLNG vessel, Exmar was able to achieve production costs of US$500 per tonne when it was deployed to Argentina in 2019, making it very cost competitive, he said.
Using feed gas from Argentina’s Vaca Muerta shale gas field, Tango FLNG operated for a year and a half in the country, producing LNG cargoes for export.
With a length overall of 144 m, beam of 32 m, draught of 5.4 m and a storage capacity of 16,100 m3, Tango FLNG can produce approximately 0.5 mta of LNG. The first FLNG vessel in the Americas and the first barge-based unit of its kind, Tango FLNG made use of space-efficient Black & Veatch Prico single-mixed refrigerant technology.
Mr Raes said it was deployed in Argentina, Tango FLNG produced LNG which would gradually load cargo via ship-to-ship transfer to a conventional LNG carrier moored alongside. The LNG carrier would gradually be filled up over a 35-day period. Once filled, the cargo would be sold on the international market.
The Tango FLNG vessel is fully self-sufficient, with its own diesel-electric power generation, said Mr Raes: “Basically, you need the gas connection pipeline, gas hose unloading arm and you are ready to liquefy – depending, of course, on the gas specification.”
He continued: “In Argentina, we had our first meeting with the customer in August 2018. Three months later, we signed a long-term contract. About six months later, we had produced the first LNG, and the facility was commercially accepted in early June 2019. Since then, we produced five cargo successfully from shale gas, which was sold into the international energy markets.”
Originally, Tango FLNG was expected to operate for 10 years in Argentina, producing LNG under a long-term charter agreement between Exmar and YPF. The Argentina oil and gas company estimated it would produce annual revenues of US$200M from LNG exports.
This never materialised because of the energy demand destruction caused by the coronavirus pandemic. This led YPF in June 2020 to declare force majeure on the charter. In October 2020, it reached a settlement to pay US$150M to Exmar for the cancelled contract.
While it was in operation, Tango FLNG “performed fully above our expectations,” said Mr Raes.
“FLNG has a very strong value proposition. We can now deploy this facility and unlock new gas reserves around the world on a very fast-track basis,” he said.
“When it comes to newbuild FLNG solutions, the first LNG can be achieved slightly longer than three years, with a very cost competitive solution.
“In the meantime, the technologies are fully proven [and] mature. We will continuously integrate the learning curve from existing projects into new developments. It is important to consider when implementing FLNG technology that the project needs to be competitive with cyclical LNG markets” he concluded