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Business Last Updated: Aug 18, 2016 - 2:07:02 PM


Waiting for the FLNG upturn
By Karen Thomas, LNG Shipping 17 Aug 2016
Aug 18, 2016 - 2:06:03 PM

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Offshore LNG production, or floating LNG (FLNG), has hit the headlines regularly this year – although from the point of view of growing the LNG shipping business, this has mostly been for all the wrong reasons.
Although the world’s first FLNG vessel, Petronas-owned PFLNG Satu, hit the water in May, other FLNG projects have been delayed or cancelled, as falling commodity prices have cut prospective returns on these ventures that unlock remote or stranded gas reserves.

Of the seven confirmed FLNG projects that LNG World Shipping identified last autumn, PFLNG Satu and the 2.2 mta, Golar LNG-owned Hilli seem closest to staying on track. The casualties have included big players and small.

Exmar is now seeking new opportunities for its 500,000 tonne a year barge, after its agreement to place Caribbean FLNG off Colombia fell through this summer. And Petronas will delay delivery of its second, larger FLNG vessel.

Many proposed projects have been postponed or quietly shelved. Shell cancelled its US$4.6 billion order for three huge 3.9 million tonne a year (mta) FLNG vessels from SHI. And Indonesia has decided to bring ashore, mostly for geopolitical reasons, its vast 7.5 mta Abadi FLNG project.

So when will the tide turn for FLNG? Douglas Westwood’s timely FLNG Market Forecast expects spend on offshore LNG – in which it includes both imports and exports – to peak as early as next year. The report predicts FLNG expenditure of some US$7.5 billion in 2017, as the first vessels start production.

Douglas Westwood expects FLNG capital expenditure to focus on Africa and Australasia in 2016-2022, with Africa alone accounting for US$14.3 billion – or 34 per cent of total spend. It names Mozambique, Ghana, Equatorial Guinea and Ain Sokhna in Egypt as the production sites to watch.

Another future hotpot is Iran, which is keen to get its gas to market quickly. Golar LNG expects to position at least five FLNG vessels in Africa and the Middle East.

Long term, industry watchers expect improved FLNG technology to push down costs and for growth in gas demand and hardening oil and gas prices to improve the business case for offshore production. FLNG projects claim to offer greater security to investors – as well as lower costs and shorter lead times.

But of 17 proposed FLNG projects that this website listed last autumn, just two have made visible progress. Samsung Heavy Industries (SHI) expects to close an order this year with Italy-based ENI for the Coral FLNG project off Mozambique. And Russia-based Gorskaya LNG is pushing ahead with local approvals for its barge-based project near St Petersburg.

And so the upturn in FLNG expenditure may prove brief for now. Low commodity prices look set to push down spend towards the end of the decade, with a significant drop in 2019. This suggests that the so-called second wave of FLNG projects is now unlikely to build momentum before 2022 at the earliest.


Source:Ocnus.net 2016

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