LNG (Liquefied Natural Gas) carriers are also an interesting sector in shipping industry. LNG is predicted to be a major factor in world's energy industry "after oil".
LNG carriers in our Tanker Stock List are LNG $40.40, GLNG $25.83 and TGP $32.37. GLNG and TGP pay dividends of size ca $0.50 (Check!).
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Poten & Partners monthly publication: LNG in World Markets.
Floating LNG Production Attracts Renewed Interest
Offshore liquefaction is staging a strong comeback, attracting interest from a wide range of
companies and expanding the net of potential participants beyond the traditional LNG “club.” On
September 19, two different groups unveiled plans to develop floating production and storage
operations for LNG. The first announcement came from a consortium consisting of ship owner
Höegh LNG, Aker Yards and ABB Lummus Global. This was followed on the same day by a
similar statement from offshore specialists SBM Offshore and the German engineering and
technology company Linde AG. Rumors also abound that Flex LNG may declare an option on a
third ship, following the signature of a Memorandum of Understanding with an unidentified energy
company for one of its M-Flex LNG Producer vessels (see related story above).
Höegh’s FPSO (edit: Floating Production Storage and Offloading) project is for a ship-shaped structure capable of processing up to 2.5 Bcm/y of
feedgas to produce 1.6 MMt/y of LNG and 0.5 MMt/y of liquid petroleum gas. It will have
capacity to store 180,000 cubic meters of LNG and 30,000 cubic meters of LPG. Aker is
responsible for the hull, storage and utility systems while Lummus will provide the design for the
gas processing, liquefaction and LPG facilities. The FPSO will use the proprietary NicheLNGSM
turbo expander liquefaction process developed by Lummus, while LNG storage will be in Aker’s
proprietary SPB-type Double Barrier Tank containment system. Pre-feasibility studies on the
concept are underway and the sponsors say the first unit could be delivered as early as 2011.
The FPSO planned by SBM and Linde is
slightly larger. It would use the German
firm’s Multi-Stage Mixed Refrigerant process
to produce 2.5 MMt/y of LNG plus LPG and
condensate byproducts from stranded gas
reserves as small as 1 Tcf. The structure will
have 230,000 cubic meters of SPB-type
containment for LNG and liquid byproduct
storage. SBM Offshore has commissioned
Japanese ship builder IHI to undertake basic
hull design. The long-term agreement also
requires IHI to offer capacity at its Aichi
works for an early project. SBM has started
its global marketing effort and hopes to have
a unit onstream by 2012.
London-based Flex LNG plans to use at least one of its new builds as a production ship for a
project based in the Asia-Pacific region. Flex announced the conclusion of its second private
placement on September 7, increasing the amount of funds raised to $220 million. The new
financing will be used for down payments on two 90,000 m3 ships being built by Samsung Heavy
Industries for delivery in 2010 and 2011 (see LNGWM, Jun ’07). Other companies considering
floating LNG projects include BW Offshore, Exmar and LNG Partners. Although most schemes
require new builds or custom barges, some players are considering the use of existing vessels.
Such schemes will need to balance the cost benefits associated with accessing fully depreciated
ships against potential sloshing issues for vessels with membrane storage tanks and, in the case of
spherical Moss-type ships, a shortage of available deck space for processing equipment.
Interest is almost exclusively concentrated on small stranded gas fields, rather than the large-scale
projects contemplated by the major oil firms in the past. The proposed facilities all hope to tap
structures that are either too small or too isolated to support a baseload project. Other potential
advantages include a sharp reduction in upstream development costs and the system’s portability, which could allow a single unit to process gas from several fields within its working life. Reduced
project size and potential ship-like leasing arrangements for the floaters also promise to increase
the list of potential participants and the viable resource base for development. Finally, project costs
and timelines may benefit from the application of shipyard construction techniques and established
skilled labor forces.
But the concept faces a number of technical and commercial hurdles as well. Stringent feedgas
quality requirements, demanding the removal of almost all carbon dioxide, hydrogen sulfide and
heavier hydrocarbons, will require installation of extensive pretreatment facilities, particularly if
the FPSO exploits several different gas fields. All offshore systems must perform efficiently in
pitching seas – a tough requirement for some of the absorption and separation columns required for
acid gas and LPG separation units – and are subject to extremely strict design codes. Floating
projects will also have to reconcile the production profiles from depleting gas fields with the need
for steady feedgas conditions and rates.
Cost signals for offshore development are mixed. While ship building costs have not risen to the
same extent as those for liquefaction plants, offshore exploration and development projects are
subject to many of the same pressures experienced on this side of the business. It remains to be
seen whether these ventures are viable at Henry Hub prices of $5 to $6/MMBtu. However, the
major challenge facing these projects will continue to be the same one facing many gas
monetization technologies: finding upstream partners with sufficient natural gas reserves. With the
exception of Flex LNG’s recent MOU, no other project has given any indication that it has lined up suitable candidates on the upstream side. No one has secured buyers for the LNG output produced from these FPSOs either, although this should not be a problem once the other elements of the project are in place.
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