(EnergyAsia, April 3 2012, Tuesday) — The following is an edited version of an interview by IQPC’s Bryan Camoens with Jason Waldie, an associate director for energy consultant Douglas Westwood, on the role of floating LNG terminals in gas production from stranded fields. Mr Waldie will provide more details at the upcoming 8th Annual FLNG Asia Pacific Summit in Singapore.
 
Bryan Camoens: How welcoming is the global LNG market towards FLNG?
 
Jason Waldie: The market is very welcoming.  Certainly, it has opened the market to more gas reserves which were previously not economic using conventional technologies. We can look at this going straight to LNG plant. If anyone in the industry is not really welcoming about it, it could be pipeline manufacturers or FDSS suppliers or related.
 
Camoens: Why aren’t the pipe manufacturers welcoming of FLNG projects?
 
Waldie: FLNG skips one of the steps which bring gas to shore to be liquefied and sent to market. FLNG exploits smaller fields that would not be economically viable and saves traditional processing steps.

As FLNG is a fairly new technology, the industry was waiting to see who would start up with the first project, but it is something we are going to see increasing in the next few years.

Camoens: When you go through the supply and demand balance, how favorable is this trend with FLNG?
 
Waldie: I think FLNG really does not have a huge impact on supply demand analyses currently and for the next few years as the incremental supply coming from FLNG will be small in comparison to traditional processes involving land-based liquefaction terminals.

It is not a global game changer but more of an industry game changer. It opens the industry to the new field development opportunities and certain regions will benefit more than others, like the Asia Pacific.

Camoens: What are the challenges facing FLNG investments?

Waldie: One of the important ones is project financing and the risks involved as it is still in its infancy. Only the really big players are willing to take the risk for some of these projects.

Another issue would be the technology as there are still issues to be ironed out given the competing technologies, different players and manufacturing consortiums are still trying to figure out the best way to get an FLNG system up and running in the most economic, risk adverse and practical way.

Shell’s proposed Prelude terminal is more like a big barge than a vessel.  Other players are trying to get in, and iron out technological challenges with the small-to-medium-sized FLNG vessels.
 
Camoens: How lucrative is an FLNG investment in tapping stranded gas?
 
Waldie: Before they make a decision, companies look at the price of extracting gas, the size of the fields, marketing contracts for gas going forward. They put all these into the mix and find that with FLNG technology, some of these projects are economically viable.
 
The modular design of FLNG vessels means that they can be built in low-cost environments, then towed to locations to reduce overall costs. Another advantage of the floating liquefaction design is that it acts as a processing platform as well as a liquefaction facility thus eliminating costly production facilities.

Vertically integrated majors will be best placed to assemble a project from the upstream through to liquefaction, transport and re-gas stages. The smaller players will, however, have a role to play where parties looking to progress FLNG developments include both the vertically integrated majors (e.g. Shell) and smaller independent service providers.

As the industry become more involved, we will see growth in small-to medium-sized FLNG vessels being operated by second tier companies to mop up the stranded gas fields.

For companies actively looking at export and production options to avoid flaring and unnecessary re-injection, the FLNG terminal is certainly an investment option.