FLNG Presents an Economical Alternative to Expensive Onshore LNG Facilities
Traditionally, liquified natural gas (LNG) facilities have been built onshore. However, establishing such facilities has become increasingly expensive in recent years, leading to the development of more cost-effective alternative solutions such as floating liquified natural gas (FLNG). As opposed to onshore terminals, FLNGs allow as economical solution to monetising stranded and associated gas. LNG offers a way of diversifying the energy supply and power generation feedstock, to many countries, thus increasing energy security. In 2019, the global LNG trade in terms of volume accounted for 354 MT, a 13% increase vs. 2018. More than 40 countries were importing LNG and approximately 20 countries were LNG exporters. The recent boom in global LNG construction could witness global output almost doubling its 2012 level of 250 million tonnes per year by 2030. Around 60 million tons per annum (MTPA) of this is in Australia.
Rising Demand and Increasing Application to Boost Demand for Natural Gas
The main drivers for the investment inflow to the FLNG market include the growing confidence in the ability to take the liquefaction process offshore, the growing amount of LNG production globally, and the ease of utilising it (with floating storage regasification unit (FSRUs)). FLNG and the development of new pricing methods, and unconventional gas-to-LNG projects may lead towards a faster-moving, more diverse, and more flexible global LNG industry. The strong arbitrage opportunity that used to exist between the price of natural gas in export markets, and the price of LNG in import markets, has weakened significantly over the past year, and whether higher price differentials return or not will determine the future of many LNG projects. Moreover, when it comes to relocation ability of FLNG, companies offer the option to lease, not buy. Nevertheless, the need to expand the LNG infrastructure value chain to connect natural gas exporting and importing markets still exists. FLNG will be a part of this solution, with FSRUs already assisting.
The uncertainty regarding the safety, and viability of FLNG remains a core concern to those financing, and insuring the projects. Taken in concert with high capex, this uncertainty means that only the largest players in the global energy industry have been able to overcome barriers to entry. Establishing the safety, functionality, and problem areas of these vessels is critical to the industry’s expansion as such information will make projects both easier to finance, and more straightforward to insure. On the FSRU side, barriers to entry are lesser but the specialism of FLNG has kept the market limited. The ongoing COVID-19 pandemic has held a harsh impact on the oil and gas industry. In 2020, the global LNG trade shrined by 2-3% compared to that in 2019 owing to COVID-19 impact on seaborne trade activities. A heavy dip in demand, followed seaborne trade limitations, derailed the growth of the global FLNG market.
High Investments in FSRU Facilities to Provide Impetus to Market Growth
For a new build FLNG, the construction costs, usually the largest single component, run at 30 percent of the total project cost. The global FLNG market consists of a floating production storage and offloading (FPSO) unit on the export side, and FSRU on the import side. The market for regasification vessels will respond more quickly to changing dynamics of production and demand compared to the market for liquefaction vessels due to the smaller capital investment required and greater capacity of LNG shipyards to build and convert these units.
In 2019, the global LNG fleet saw 8.4% year-on-year (YoY) growth over 2018 with a total addition of 42 new vessels, out of which three were FSRUs. Around 71 MTPA of liquefaction capacity was sanctioned and 42 MTPA in capacity was brought on-stream. The LNG shipping industry kept pace with this growth, adding 42 new vessels to a total of 541 active vessels by the end of 2019. The active fleet includes 34 FSRUs, four FSUs.
High Number of Planned FLNG Projects Uphold Market in North America
In 2019, the global FLNG proposed capacity was 44 MT. By 2022, more than 20 new FLNG vessels are expected to get deployed. Currently, 119.2 MTPA of liquefaction capacity is either proposed, or in a developmental stage. In June 2019, Prelude FLNG (3.6 MTPA), and Tango FLNG (0.5 MTPA) achieved commercial exports, thus becoming the third, and fourth operational FLNG developments in the world after Cameroon FLNG (2.4 MTPA), and Petronas FLNG Satu (1.2 MTPA). FLNG promises to unlock smaller, remote, or environmentally-sensitive fields.
In North America, the US and Canada are emerging as potential LNG players, where approximately 85 MTPA out of 119.2 MTPA FLNG capacity is planned. Growing shale E&P activities in the US have opened up new possibilities to use floating systems for export. Thus, North America is expected to witness staggering demand for FLNG over the years to come. In Asia Pacific, a majority of operational, and sanctioned FLNG facilities are in Australia, followed by Malaysia. Shell’s Prelude FLNG (3.6 MTPA) came online in 2019, producing LNG from the Browse Basin offshore Western Australia. The Middle East & Africa, and South America are considered as the emerging markets for FLNG. In Africa, Mozambique, Cameroon, and Nigeria will be the key nations heavily investing in FLNG. In May 2021, KBR, Inc. has announced it will be supporting the development of Nigeria's first-ever FLNG facility, enabling the country’s economic growth, and sustainability for the future energy supplies.
In South America, recently, the global sustainable energy developer Invenergy, and a global LNG solutions provider BW LNG announced the closing of a US$128.3 Mn financial package with IDB Invest to finance the specially-built FSRU component of the Energía del Pacífico (EDP) LNG-to-power project in El Salvador. In June 2021, Excelerate Energy FSRU has begun operations in Bahia Blanca, a port city located 400 miles south to the Argentine capital Buenos Aires. The Exemplar, with a storage capacity of 150 900 m3, will deliver LNG for the winter 2021 in Argentina, providing reliability, and stability to the country's energy system despite prevalence of challenging conditions of the South Atlantic region.
Global Floating Liquefied Natural Gas Market Competition
Some of the key players in the floating liquefied natural gas market include Royal Dutch Shell, Petronas, Golar LNG, Excelerate Energy L.P., Höegh LNG, Exmar, Noble Energy Inc., Hyundai Heavy Industries Co., Ltd., TechnipFMC plc, Samsung Heavy Industries Co., Woodside, DSME Co., Ltd., and Saipem S.p.A. PETRONAS has become the first global energy company to produce LNG from two floating facilities, following the first cargo delivery by PETRONAS Floating LNG DUA (PFLNG DUA) on 24 March 2021.
Key Elements Included In The Study: Global Floating Liquefied Natural Gas (FLNG) Market
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