LNG Industry March 2012

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ContentsISSN 1747-1826

03 Comment05 LNG news10 A tale of two gas markets

Ng Weng Hoong, LNG Industry Correspondent, discusses the disparity between the Henry Hub price and the Asian LNG price.

18 A toast to 2011!Pat Roberts, LNG-Worldwide Ltd, UK, looks back at a successful year for the global LNG sector.

25 FLNGs time to shineVictor Alessandrini and Mohamed Ould Bamba, Technip, Europe, discuss the increasing importance of the FLNG concept for offshore gas production.

30 Floating between islandsOlaf Beyer, TGE Marine Gas Engineering GmbH, Germany, discusses the provision of engineering services to provide LNG infrastructure for Guadeloupe and Martinique.

37 Small scale solutionsMoty Kuperberg, Dynamic Shipping Services, Israel, explains the benefits of using the small scale LNG feeder system to supply consumers spread over many destinations.

40 Shipping: awash with costsLars Petter Blikom, DNV, China, examines how cost increases in the shipping industry are leaving shipowners searching for cost reduction measures.

45 Dropping the temperatureVasserman Aleksandr and Shutenko Maxim, Odessa National Maritime University, Ukraine, explain an alternative method of LNG transportation, which eliminates the need for an onboard reliquefaction plant.

47 Offshore storage solutionsStphane Maillard, GTT, France, examines the benefits of using membrane tank systems in offshore FPSOs and FSRUs.

53 Agents of changeNick Elliott, Inchcape Shipping Services, UK, examines the role of shipping agents in the LNG sector.

58 Qatari shipyard goes globalRebecca Watson, Nakilat, Qatar, details the rise of the successful Nakilat-Keppel Offshore and Marine repair yard.

64 Getting it right first timeBarbara Grant, International Paint, UK, describes the benefits of spending time and money on quality coatings to prolong the lifespan of ships.

72 Meeting the challengeThierry Vermeersch, AVEVA, UK, examines current capabilities and trends in the integration of engineering, design and information management technologies between the plant and marine industries.

77 Storage challengesMun-Seong Kim, Endress+Hauser, Japan, describes the intricacies of LNG storage solutions.

81 Sweet from sourLorenzo Micucci, Siirtec Nigi, Italy, takes a holistic approach to sour gas treatment.

85 Scaling it downJames Solomon, Jr., Air Products, USA, explains how small to mid-sized plants are likely to play a key role in servicing demand.

89 Vanquishing varnishAkram Reda, ExxonMobil Lubricants and Specialties, EAME, explains the benefits of choosing the right lubrication oil for gas turbines.

93 25th World Gas Conference 2012: Exhibitor PreviewLNG Industry presents a small selection of companies that will be exhibiting at the 25th World Gas Conference, Kuala Lumpur, 4 - 8 June 2012.

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CB&I was selected to provide front end engineering and

design (FEED) services for the Yamal LNG project. The project

encompasses production, treatment, transportation, liquefaction and shipping of natural gas and NGLs from

the South Tambley eld on the Yamal Peninsula in Northern

Siberia, Russia. CB&Is scope includes FEED development for a 16.5 million tpy LNG

liquefaction plant, including LNG storage and loading facilities.

10PAGE

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Comment/ANNA SCORDOS EDITOR/

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In December, I accompanied the Winter issue of LNG Industry to the World Petroleum Congress

in Doha, Qatar. During my time in Doha I had the privilege of visiting Ras Laffan Industrial City, which was a unique experience. The site was astonishing in its scale, having been transformed from barren desert into a technologically sophisticated energy hub supplying all corners of the world. It is amazing to consider that the transformation of the Qatari economy on the back of natural gas has occurred in such a relatively short period of time; Qatars North gas field was discovered in 1971 and Ras Laffan Industrial City began operations in 1996. In that time frame, the countrys GDP has increased from approximately US$ 300 million in 1971 to US$ 110 billion in 2008. And they have plenty of shiny skyscrapers to show for it

Naturally, industry players spend a lot of time conjecturing which region or country is likely to be the next big thing. Australia has taken the limelight away from Qatar somewhat recently, and continues to develop at a promising rate, with huge amounts of money being invested in first-of-a-kind projects such as Shells Prelude FLNG project; the largest floating facility in the world. Inpex and Total are proceeding with their joint development of the Ichthys project one of the largest onshore gas facilities in the world. The companies have arranged US$ 70 billion worth of sales agreements with Japan for 15 years worth of LNG production. BG Group has recently announced it will sell down its stake in the Queensland Curtis LNG project for up to US$ 2 billion. The company intends to sell approximately 20% of its existing 93.75% stake in the project, which is set to be the first in the world to produce LNG from coalbed methane.

Demand for LNG from Asia continues apace; reports have claimed the region will expand its regasification capacity by almost 35% between 2010 and 2015. China aims to bring three LNG import terminals online in 2012 and in the same year Japanese demand for LNG is likely to increase by more than 25%. China is likely to be the second largest LNG importing country by 2020, after Japan.

The world keeps looking for the next big supplier. But aside from Australia, another region that is gaining some attention as an emerging potential exporter is the eastern coast of Africa. Shell has recently agreed a 992.4 million bid for Cove Energy, a small oil and gas exploration company with interests in east Africa. Cove currently owns an 8.5% stake in a large gas field recently discovered offshore Mozambique. Anadarko Petroleum, Cove and Eni have all made huge gas discoveries in this area. According to Financial Times correspondent Guy Chazan, Their two fields combined could contain up to 60 trillion ft3 of recoverable resources of gas nearly as much as Kuwaits entire reserves. That should be enough to turn Mozambique into a key exporter of LNG, to China and Indias fast growing economies. As the gas majors move into the area and buy out smaller companies such as Cove, the pace of exploration and LNG development in the region will inevitably accelerate. Chazan points out that, Fewer than 500 wells have been drilled in east Africa, compared with some 20 000 in the north and nearly 15 000 in the west of the continent. Maybe the LNG sector could start contemplating a new multi million dollar question: if Australia is the next Qatar, could Mozambique be the next Australia? Well have to wait and see

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After 50 years of operation, the Groningen gas field in the Netherlands is now, and also for the coming decades, able to continue supplying its clients. The facilities have been fully modernized. One key success factor was the long-term relationship of the operating company NAM and its contractors. Siemens has updated the compression and

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variable-speed drive technologies to ensure the adapta-tion of the gas supply to fluctuating demand, to slash maintenance requirements, and to maximize environmen-tal performance. Highest availability and low power con-sumption of all units are the best basis for an eco-friendly and successful operation.

Nothing can stop a real performer.Eco-friendly compressor technology boosts production

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LNGNews

Spring2012 / LNGINDUSTRY / 5

Hegh LNG has entered into a 10 year time charter for a floating LNG storage and regasification unit to be used as an LNG import terminal in Lithuania. The agreement is subject to the approval of the shareholders of AB Klaipedos Nafta. The Lithuanian state owns 70.63% of Klaipedos Naftas shares.

Hegh LNG intends to use the second of the three new regasification vessels being built at Hyundai Heavy Industries Ltd in South Korea for this agreement, which will commence in the second half of 2014. The time charter is expected to give an EBITDA contribution of approximately US$ 50 million per year.

Hegh LNGs President and CEO, Sveinung Sthle, said, We are delighted to have established a long term relationship with Klaipedos Nafta and we look forward to operating the floating LNG regasification terminal in the Port of Klaipeda.

The proposed FSRU would break up the Russian monopoly on gas imports to Lithuania. The deal with Hegh comes soon after Russian gas giant Gazprom has begun legal manoeuvres to protect its investments from changes to Lithuania's industry legislation.

DENMARK

Maersk sells LNG units

LITHUANIA

Hegh LNG to supply FSRU

The Danish company Maersk has released a statement regarding its recent sale of Maersk LNG to Teekay LNG and Marubeni Corp. The agreement was subject to a regulatory approval and consents from Maersk LNGs customers. These conditions have now been fulfilled. Accordingly, A.P. Mller-Maersk A/S has completed the sale of all the shares in Maersk LNG to Malt LNG holdings ApS, a company jointly owned by Teekay LNG Operating LLC and Marubeni Corp.

Under the terms of Maersk LNGs partnership agreements with Socit Generale and Qatar Shipping Co., each owning an LNG vessel, the sale of Maersk LNG triggered pre-emption rights to Maersk LNGs partnership shares.

Both partners have exercised the pre-emption rights and acquired Maersk LNGs 26% ownership share in each of the limited partnerships on the same terms as offered by Teekay LNG and Marubeni Corp.

The sale of Maersk LNG generates an accounting gain for the A.P. MollerMaersk Group in the order of US$ 80 million, including accumulated exchange rate differences previously recorded in equity, Maersk added.

GLOBAL

LNG for HGVs?

The use of LNG by giant cargo vessels crossing the worlds oceans has been advocated for some time and has recently started to pick up steam. What might be less well known, however, is the small but growing trend towards using LNG for road haulage vehicles such as HGVs.

Although the infrastructure is nowhere near as widely distributed as that provided for conventional fuels, companies in the USA, such as Encana Corp., have begun to make real inroads towards using LNG as the main fuel for their goods vehicles. Encana recently completed

construction of its first LNG fuelling station and its partner, Heckmann Water Resources, has ordered 200 LNG fuelled vehicles, with 50 already operational.

Executive Vice President of Encana, Eric Marsh, said, This new station is a major step towards encouraging companies to convert their vehicles to run on affordable, environmentally-responsible natural gas.

In Europe, Volvo has promoted the development of blue corridors, which would provide a network of LNG refuelling stations for goods vehicles across the continent.

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LNGNews

6 / LNGINDUSTRY / Spring2012

USA

Cheniere secures funding

CHINA

CNOOC begins China's first FLNG project

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Cheniere Energy Partners has secured US$ 2 billion worth of funding as part of an exclusive deal with Blackstone Energy Partners L.P., Blackstone Capital Partners VI L.P. and certain affiliates, to fund the building of its planned LNG liquefaction plant at Sabine Pass LNG terminal and acquire the Creole Trail pipeline.

Cheniere Energy Partners is moving towards a final investment decision on the first phase of its proposed liquefaction plant. The first phase will consist of two liquefaction trains with a capacity of 4.5 million tpy at a total cost of US$ 4.5 - 5 billion.

Construction is expected to begin in the first half of 2012. Cheniere Energy Partners is looking to take advantage of high Asian and European LNG prices to export shale gas in the form of LNG.

The liquefaction project is expected to be constructed with each LNG train commencing operations approximately six to nine months after the previous train. The company has already entered into a lump sum turnkey contract for the engineering, procurement and construction of the first two trains of the project with Bechtel Oil, Gas and Chemicals, Inc.

Chairman and CEO of Cheniere, Charif Souki, said, "Obtaining this financing will be a significant milestone for the advancement towards construction of the first two liquefaction trains."

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China National Offshore Corp. (CNOOC) has begun the construction of China's first floating LNG (FLNG) facility in the city of Tianjin. More precisely, the development will involve the construction of a floating storage and regasification unit (FSRU).

The groundbreaking project is set to cost approximately US$ 900.5 million and is designed to be able to manage 2.2 million t (or 3 billion m3) of LNG per year. Other investors in the project include Tianjing Port and Tianjing Gas Group.

CNOOC has also announced that it has plans for a second phase of the project, which will involve the development of a land-based LNG terminal capable of receiving 6 million tpy and due to be operational by 2015.

Ever rising domestic Chinese demand for LNG delivered by tankers has seen a host of onshore LNG terminals enter operation along China's east coast.

This demand has led to intense competition between Chinese industry giants with companies such as CNOOC, PetroChina Co. Ltd and Sinopec fighting for suitable terminal sites, which has led to a demand for FLNG facilities.

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LNGNews


Fairstar Heavy Transport N.V. has been awarded two transportation contracts for the giant Ichthys LNG project situated offshore Darwin, Australia.

The contract, scheduled to begin in Q2 2014, will involve the use of two of Fairstars semisubmersible ships Forte, and Finesse for a minimum of 12 months each. This 12 month tenure is estimated to be worth US$ 56 million.

Japan Gas Corp., the company that awarded the two contracts, has an option to prolong the two contracts by an additional six months, adding a further US$ 28 million to the contract value.

The two vessels will travel between the Ichthys site and several different construction yards in Asia as they transport the components for the two LNG trains due for construction in Darwin.

Fairstar CEO, Philip Adkins, said, Fairstar will work closely with JGC to manage the safe and reliable delivery of the LNG modules for Ichthys and will be closely engaged with the JGC project Team in Japan.

S ingapore uses LNG to meet approximately 80% of its power generation requirements, most of which is piped in from Indonesia and Malaysia. However, growing energy demand in these two countries looks likely to reduce the amount of LNG that is available for Singapore to import.

In an attempt to supplement its energy supplies in light of what appears to be an inevitable decline in imports from Indonesia and Malaysia, Singapore has constructed a new LNG terminal capable of managing imports of up to

15 million tpy. According to some analysts, this means that the terminal should theoretically be capable of supplying Singapores entire energy needs if the long term contracts with Indonesia and Malaysia were not to be renewed.

The Chief Executive of Singapores Energy Market Authority, Chee Hong Tat, said, Supply will come under pressure because of growing domestic gas demand in Malaysia and Indonesia. What we will do is ensure sufficient capacity to import LNG to meet all of our gas demand.

The Spanish company has reported a 6.4% increase in its net income for the first nine months of 2011, bringing the figure up from g 1.786 billion to g 1.901 billion from the previous year. Total operating income for the company was recorded as g 4.01 billion; a 1% increase on September 2010.

The most dramatic improvements were seen in the group's LNG division, with profits for the first nine months of 2011 rising a staggering 367.8% to g 276 million up from their 2010 value of g 59 million. The company attributes this rise to an increase in sales volumes.

Other members of the group fared less well, with YPF reporting a decline in income of approximately g 200 million down to g 1.008 billion. Gas Natural Fenosa also posted a reduced income of g 712 million, down 4.9% on the previous year.

The company announced that, "The 2011 earnings increase is mainly due to improved oil and gas prices [...] with a 13.4% and 14.8% increase respectively, this was boosted by the solid performance of the LNG division."

AUSTRALIA

Fairstar scores Ichthys contracts

SINGAPORE

LNG terminal imports to replace piped supply if needed

SPAIN

Repsol's income rises to W 1.901 billion

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LNG_Spring2012_05-09.indd 9 16/03/2012 14:08

A TALE OF TWO GAS MARKETS

Ng Weng Hoong, LNG Industry Correspondent, discusses the disparity between the Henry Hub price and the Asian LNG price.

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As US natural gas prices plunged below US$ 2.40 per mmBTU to their lowest levels in over a decade, LNG held firm near record levels in Asia, creating probably the greatest arbitrage trading opportunity in the history of any major commodity. But no one was taking advantage of this sure win high-margin trade, (or likely will in the near term), to ship North Americas natural gas to Asia, which continues to pay between US$ 16 - 20 per mmBTU for its spot LNG cargos.

In this strange tale of two markets for the same commodity, North Americas rising natural gas production and lack of export infrastructure could ensure that its overflowing supply continues to sell for an astonishing discount to Asian prices for a few more years.

In the USA, weak demand, insufficient storage capacity and record production of over 23 trillion ft3 last year, primarily from shale, drove natural gas prices down by a third from 2010. These trends are expected to continue through the rest of 2012 and even beyond unless the weather turns seriously cold and the economy recovers strongly.

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But in Asia, consuming countries cant get enough supply from a handful of maxed-out regional producers, ensuring natural gas and LNG prices remain supported at or near current high levels. This is contributing to the worsening shortages and rising costs of electricity in the region.

Led by Asia, global natural gas consumption will grow at an average annual rate of 2.1% through 2030, outpacing oil and coal, according to BPs latest Energy Outlook report.

BP claims that Asian LNG demand will constitute the fastest growing segment of the natural gas market. In response, annual global supply will grow by 4.5% to 2030, more than twice the rate of global gas production and faster than the 3% annual rate of increase seen for inter-regional pipeline trade, the report said. Growing at an annual rate of 7.6%, Chinas gas use will reach 46 billion ft3/d in 2030 to match the size of the European market. The BP report raises the hopes of producers and traders hoping to exploit the widening Asia-North America price, predicting that the USA and Canada will be able to export 5 billion ft3/d by 2030.

Paradoxically, the prolonged weakness in North American gas prices has created a powerful long term barrier, not incentive, to export. Large industrial consumers like power and petrochemical companies are opposed to exports that will raise their feedstock costs.

The anti-export lobby cites recent studies by Navigant Consulting, Deloitte and ICF International showing that domestic US gas prices could rise by 15 - 20% from current levels if producers succeeded in exporting between 6 and 12 billion ft3/d. These price increases could hobble US attempts to revive its battered manufacturing sector.

The debate over US LNG exports could become an important reference point for the future of Asias energy supply. Both sides have lined up powerful supporters, with producers like ExxonMobil and Chevron investing heavily to boost unconventional gas supply in favour of exports while chemical companies and industrial consumers argue that they need cheap energy feedstock to compete against low-cost Asian manufacturers.

Asia dissipating global LNG supply glut, say two separate studiesAmerican fears are well founded according to two recent studies which found that fast-growing Asian demand is starting to impact the current glut in global gas supplies.

A report distributed by consulting firm Research and Markets predicts that the glut will dissipate from 2014, with Asia-led demand expected to exceed supply by 75 million t by 2020.

China, Japan, India, South Korea and Southeast Asia will use more LNG not only to fuel their economic growth, but also to try to displace coal and oil in their energy mix to reduce pollution.

In the near term, the report said global LNG demand at 248.5 million t in 2011 will be boosted by the hurried closure of the majority of Japans nuclear power plants as well as plans for nuclear phase-out by several European countries. The report said another 17 countries will become LNG consumers and begin competing for supplies through the decade.

Exacerbating the supply tightness, the report said many proposed export terminals in Asia and Australia will not be built in time as a result of insufficient funding and skilled labour shortages.

In its latest annual survey, the France-based international association CEDIGAZ said that global LNG trade is poised for rapid expansion in the short term after growing by 10% last year, partly due to a demand surge in Japan following the Fukushima Daiichi nuclear plant tragedy in March 2011. Rising demand in Asia helped offset the 9% plunge in Europe to boost global demand for 2011.

On the supply side, it predicts growth in unconventional gas output and a 60% rise in global liquefaction capacity by 2020, laying the foundation for sustained growth in the international LNG trade.

Asias regasification capacity to expand by more than a third from 2010 to 2015Asia is expected to expand its regasification capacity by nearly 35% from 14.38 trillion ft3 in 2010 to nearly 19.37 trillion ft3 in 2015, according to a report by consultant GlobalData.

Thanks to technological advancements, LNG has emerged as a viable option for importing natural gas to compete against piped gas. Since early 2008, the global LNG industry has been bolstered by rising demand, expanding supply from unconventional sources, and improved liquefaction and regasification technology.

The report found that state-owned companies dominate the liquefaction industry, with just five companies accounting for approximately 36.8% of global liquefaction capacity in 2010.

The regasification industry is more fragmented and diverse due to the low cost of building regasification plants. To meet the rising appetite for natural gas in most countries, more private companies are investing in regasification projects.

The report said that global LNG liquefaction capacity increased from 121.71 million t in 2000 to 273.92 million t in 2010 while regasification capacity rose from 264.33 million t to 583.51 million t over the same period.

Producing countries Qatar, Indonesia, Malaysia, Nigeria and Australia accounted for over 62.4% of the worlds liquefaction capacity while importers Japan, the USA, South Korea, Spain and the UK accounted for 78.6% of the total regasification capacity.

For both natural gas producers and consumers, LNG offers greater flexibility compared to pipeline delivery.

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Another pipeline to deliver gas from Central Asia by 2013China expects to start up its third West-to-East pipeline next year to deliver up to 30 billion m3 of natural gas from Central Asia.

Measuring a total of 18 104 km in length, the three pipelines that make up the West-to-East system will have a combined capacity to deliver 72 billion m3/yr of natural gas.

The 5200 km third network will include one trunk and six branch lines, three gas storage terminals and an LNG terminal. Operator PetroChina plans to add two lines to this network after 2015, each with the capacity to carry approximately 30 billion m3 of natural gas from Turkmenistan, Uzbekistan and Kazakhstan to Chinas industrialised coastal regions in the east.

According to the National Development and Reform Commission (NDRC), Central Asia now accounts for nearly half of the countrys natural gas imports, with LNG supplying the rest.

The first WTE pipeline measuring 4200 km started up in October 2004 and has the capacity to supply 12 billion m3/yr a year from Chinas western Xinjiang region to Shanghai.

PetroChina started building the second 8704 km network in 2008, and expects to complete it in June 2012 with the capacity to deliver 30 billion m3.

Shale to boost domestic LNG productionChina isnt just counting on imports; it is also aiming to triple its domestic LNG production to 7.5 million tpy by 2015, according to the China Petroleum and Chemical Industry Federation.

Speaking at the recent World Petroleum Congress in Qatar, Fu Chengyu, the Sinopec Group Chairman, predicted that China could overtake the USA in producing natural gas from shale and unconventional sources within 10 years.

Rival China National Petroleum Corp. (CNPC) has signed a 30 year agreement with Shell to jointly develop and produce natural gas in the Sichuan province. The partners will appraise and look to develop unconventional gas reservoirs in a 4000 km2 basin in the Jinqiu block.

China National Offshore Oil Corp. (CNOOC), the nations largest offshore oil and gas company, has started seismic operations to explore for shale gas on a 4800 km2 onshore block in eastern Anhui province.

Following its recent acquisition of Chesapeake Energy assets in the USA, the Anhui project represents the companys first onshore venture, signalling unconventional reserves as a new strategic target for future growth.

The Chinese government has set a target for the industry to produce 6.5 billion m3 from domestic sources by 2015 and 80 billion m3 by 2020.

Japans LNG imports up 12% six months after FukushimaCompensating for the loss of the bulk of its nuclear power capacity, Japan increased its LNG import by more than

12% to over 45.6 million t in the first six months of the 2011 - 2012 financial year to September 2011.

According to official data compiled by consultancy GlobalData, Japan imported 45.606 million t of LNG for the March to September 2011 period compared with 40.686 million t for the same period the previous year.

Japan has shut down more than 90% of its nuclear power capacity since March last year. Disillusioned and distrustful of the governments mishandling of the crisis, the public has demanded the complete closure of the nuclear industry by this year.

Pre-quake, Japan derived 29% of its electricity from nuclear power, and there were plans to raise that proportion to 40%. Now, Japanese demand for LNG could grow by more than 25% to over 100 million t in 2012 after surging by over 15% to a record of more than 80 million t in 2011, said a senior executive from the Japan Oil, Gas and Metals National Corp. (JOGMEC). Qatar and Australia are slated to become future major LNG suppliers with traditional suppliers Indonesia, Malaysia and Brunei playing support roles.

Indonesias state energy firms preparing to import LNGIndonesia was, until recently, the worlds largest LNG supplier, but now faces the prospect of becoming a net importer later this decade as it is not finding and developing enough new gas reserves to meet its growing domestic energy demand.

Its three main state energy companies, gas distributor PGN, power utility PLN, and oil and gas firm Pertamina, are preparing to start importing LNG.

Pertamina and PGN have formed a 60/40 joint venture firm, Nusantara Regas, to own and operate the nations first two receiving terminals in West Java and North Sumatra.

The priority will be to start up the first terminal, an FSRU, this year to serve Java, home to approximately 60% of the population. The three companies have been ordered to work on the 3 million tpy terminal on the western part of the island with Pertamina guaranteeing LNG supply from the Bontang export terminal on Kalimantan Island.

Last April, Nusantara Regas signed a US$ 500 million deal with Golar LNG to charter the FRSU from a converted vessel to handle imports for an initial 11 year term with automatic conditional extension options up to 2025.

Golar expects to complete the conversion and deliver the 125 000 m3 vessel, Khannur, this quarter. Khannur will deliver up to 500 million ft3/d or 3.8 million tpy of LNG through a Nusantara Regas pipeline to two power plants owned and operated by PLN.

Last December, a joint venture between Japans Mitsui OSK Lines Ltd and Indonesian shipping firm PT Trada Maritime Tbk secured the contract to ship LNG from Bontang to the FSRU.

Nusantara Regas is looking to start work on the second terminal in Arun city on Sumatra Island by 2015.

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Pertamina has set aside US$ 378 million to convert the existing export terminal into a receiving facility. In the near term, however, Pertamina faces difficulty getting the approval of the government, which is focused on completing the FRSU project on West Java and PGNs plan for a 140 million ft3/d unit in Belawan in northern Sumatra Island.

Pertamina is not giving up the fight. For now, it is cutting back on exports and redistributing LNG from within its system to meet the estimated 10 million tpy demand of its domestic customers including fertiliser manufacturers in Aceh.

Under the 2001 oil and gas law, Pertamina and other companies are mandated to allocate a quarter of their production to domestic users. The pro-export faction said Indonesia should honour its supply contracts as well to earn hard-currency revenues from LNG sales instead of subsidising domestic consumption.

Nevertheless, oil and gas regulator BPMigas has been warning its international customers to brace for further cutbacks as the countrys natural gas production is forecast to fall by another 28% in 2012.

Indonesias three main LNG export terminals at Bontang, Arun and Aech may be able to produce a total of only 262 cargos in 2012, down from last years 365 cargos. With 30 cargos already allocated to domestic customers this year, Indonesia will have only 235 cargos to meet the needs of its term customers in Japan, South Korea, China and Taiwan.

China to pay at least 50% more for Tangguh LNG cargosChinas CNOOC will have to pay at least 50% more for its LNG supply from the Tangguh export terminal in Papua province, said BPMigas.

In its negotiations with CNOOC, BPMigas wants to raise the contract price from US$ 3.35 per mmBTU to between US$ 5 and US$ 6; still substantially less than the recent Asian spot price of over US$ 16.

CNOOC helped launch Tangguh back in 2002 when it signed on as a foundation customer by agreeing to pay US$ 2.60 per mmBTU for its annual supply of 2.6 million t of LNG when crude oil was languishing at less than US$ 30/bbl.

Four years later, CNOOC, which owns a 13.9% stake in Tangguh, agreed to the first price revision by pegging LNG to a basket of crude price of US$ 38/bbl., up from the original price of US$ 25, set in 2002. The agreement allows for price reviews every four years.

With UK major BP as Tangguhs operator owning a 37.16% interest, Indonesia has secured five long term LNG supply contracts from the 7.6 million tpy terminal.

Tangguhs other customers include Sempra Energy, which lifts 3.7 million tpy while Japans Tohoku Electric Power imports 125 000 t. South Koreas Posco and K-Power each have annual contracts for 550 000 t and 600 000 t respectively.

Thailand to fast forward construction of second LNG import unit at RayongThai state energy company PTT is aiming to complete the expansion of the countrys second LNG import terminal by 2014 - 2015 instead of the original target deadline of 2016.

Citing faster than expected growth in the countrys natural gas demand, the company said the new 5 million tpy plant at its Map Ta Phut, Rayong terminal, approximately 220 km southeast of Bangkok, will have to start up soon in anticipation of the completion of new gas-fired power plants. The new US$ 400 million plant will enable Thailand to double LNG imports to 10 million tpy.

The US$ 900 million Rayong import terminal, which started up last September, making it the first in Southeast Asia, comprises two tanks each with a capacity to hold 160 000 m3 of LNG.

The Thai government has had to back away from building more coal-fired plants in the face of environmental opposition while quietly dropping plans for nuclear energy following the disaster in Japan.

The government is expected to sharply raise the share of natural gas in Thailands energy mix in its upcoming revision of the countrys long term power supply master plan, or the Power Development Plan (PDP) later this year. The previous plan, which included nuclear energy and an expanded role for coal, had envisioned natural gas use to grow by 6 - 7% a year to meet 40% of the nations energy demand. These rates will have to be raised by at least 50%.

Vietnam seeks LNG from Australia and QatarVietnam looks to be joining the growing Asian bandwagon to import LNG from Australia and Qatar.

Traditionally an energy exporter, Vietnam is facing shortages of coal and fuel as its energy demand is growing at a faster rate than its domestic production and reserves.

State PetroVietnam subsidiary PV Gas recently met with officials of Australias Queensland state and Qatargas as part of its plan to build two terminals in Vietnam to import LNG. PV Gas is aiming to build a 1 million t capacity terminal along the Thi Vai River in southern Vietnam and a 3 million t capacity terminal in Binh Thuan in central Vietnam.

The Thi Vai terminal is expected to start up by 2014, while the larger terminal is due to come onstream a year later.

India expects LNG import capacity to more than quadruple by 2020India is planning to raise its LNG import capacity from 13.5 million tpy now to 47.5 million tpy by 2016 and 62.5 million tpy by 2020, said Petronet, the countrys sole natural gas importer and LNG terminal operator.

The company is building a second receiving and regasification terminal at Kochi in Kerala state to add to its existing facility at Dahej in Gujarat.

LNG_Spring2012_10-17.indd 16 16/03/2012 15:08


Petronet could soon face competition from GAIL Gas Ltd, a wholly-owned subsidiary of GAIL, which is working with the Andhra Pradesh state government to set up an FSRU along Indias southeastern coast that will also import LNG. The partners are aiming to start up the Rs 50 billion facility by 2014 with the capacity to import up to 5 million tpy of LNG.

Separately, privately owned Reliance Industries and UK major BP have received approval from the Indian government to invest a total of US$ 1.5 billion to further develop the countrys largest natural gas block in the Bay of Bengal.

The partners are aiming to produce 10 million m3/d from four new satellite fields in the KG-D6 block from 2015. The block is producing less than 40 million m3/d of gas and is in rapid decline after peaking at approximately 60 million m3/d in June 2010.

The Indian government wants oil and gas companies to find and develop domestic reserves to reduce import dependence.

IOC awards contract for LNG terminal in Tamil Nadu stateEngineering giant Foster Wheeler AG said subsidiary Foster Wheeler India Pvt Ltd has won a contract to develop a new (5 million tpy) LNG receiving terminal in Ennore city in the Indian state of Tamil Nadu by 2016.

Australias rise as worlds LNG supermarketDespite worries over rising cost, labour shortages and a new carbon tax from July this year, Australia looks set to maintain its run as one of the biggest winners of the global LNG boom that began a decade ago.

With at least eight projects underway worth a total of AU$ 175 billion and another seven being planned, the countrys natural gas production is expected to triple to over 5700 billion ft3 over the next decade, said energy economics group EnergyQuest. (US$ 1 = AU$ 0.97).

Speaking at the recent Australia Gas 2011 conference, EnergyQuest CEO Graeme Bethune said Australia is in a strong position to lead as well as benefit from what the International Energy Agency (IEA) has called the coming golden age of the natural gas industry.

When the current eight projects are completed, Australia will be supplying 10% of Chinas gas needs, 20% of Japans needs and 30% of Koreas needs, with major economic and environmental benefits for those countries, he said.

However, Australia has to lock down as many of the projects as possible while conditions are favourable to ensure long term survival and profitability, said Dr Bethune.

He warned that some projects were already behind construction schedule and over budget, while competitors were accelerating their plans to develop LNG export terminals in the USA and Canada. Government policies, natural disasters and environmental restrictions are also presenting challenges to Australias natural gas and LNG project developers.

Acknowledging the industrys growing worries, Federal Resources Minister Martin Ferguson hinted the government may delay its approvals for new LNG projects.

Ratings agency Fitch has given Australias booming oil and gas sector a negative credit outlook this year while Deutsche Bank said the countrys workers in the resources sector are probably the worlds most expensive, earning twice as much as the global average.

China, Japan step up investment flows into Australias LNG sectorFor now, Asian investors are showing little concern about this rising wall of worry.

In January, Asias two largest economies lifted their involvement in Australias LNG sector. Chinas Sinopec Group has agreed to raise its previous 15% holdings in a US$ 20 billion LNG project in Queensland state to 25% while a consortium led by Japans Inpex announced it would invest US$ 34 billion to develop the Ichthys project in the Northern Territory state.

Sinopec Group, which paid US$ 1.5 billion for its initial 15% stake in the Australia Pacific LNG Pty Ltd (APLNG) project in April, will acquire its additional shares from consortium partners US ConocoPhillips and Australias Origin Energy Ltd.

As part of the first deal, the consortium agreed to supply 4.3 million tpy of LNG to Sinopec. In the latest deal, Sinopec will purchase another 3.3 million tpy of LNG from 2016 to 2035, said Origin Energy on behalf of the consortium.

APLNGs export-oriented LNG project includes the development of its substantial coal seam gas resources in the Surat and Bowen Basins over a 30 year period, a 530 km transmission pipeline, and a multi-train LNG facility on Curtis Island, near Gladstone. The project was sanctioned in July last year for an initial LNG production train and infrastructure to support a second train.

Separately, Inpex and Frances Total had given their final approval to proceed with their joint development of the US$ 34 billion Ichthys project.

The port city will be the site of the one of the worlds largest onshore gas facilities to process and produce 8.4 million tpy of LNG, most of it for export to Japan, from the end of 2016. The terminal will consist of two LNG trains at Blaydin Point, with additional land already made available by the Northern Territory state government for the possible addition of another four trains.

Gas from the offshore Ichthys field in the Browse Basin off the coast of Western Australia will be delivered via a 889 km pipeline to the onshore terminal in Darwin. Ichthys holds an estimated 12.8 trillion ft3 of gas and 527 million bbls of condensate.

Inpex and Total recently concluded US$ 70 billion worth of sales agreements with Japanese customers for the bulk of the projects entire LNG production for 15 years from 2017.

As one of the worlds largest LNG facilities based on an estimated 40 years of gas and condensate reserves from the Browse Basin, Ichthys will also produce 1.6 million tpy of LPG and 100 000 bpd of condensate at peak.

LNG_Spring2012_10-17.indd 17 13/03/2012 09:11

2011!A toast to

LNG_Spring2012_18-24.indd 18 13/03/2012 09:50


Last year will be remembered as a very successful year in the LNG industry. The global industry grew its sales by an estimated 9% to 240 million tpy. Several markets increased their LNG demand. Notably the UK (mainly supplied from Qatar), India, China, Korea and Argentina collectively imported approximately 15 million t more in the first nine months of 2011 than in the same period in 2010. An unexpected test for the industry came from Japan following the earthquake and tsunami in March. A sudden increase in LNG demand followed the shutdown of 11 Japanese nuclear units (12 GW). By the end of last year, it is estimated some 10 million t of additional LNG will have moved from Asia, the Middle East and the Atlantic Basin to Japan. This extra LNG demand is expected to continue whilst several nuclear units remain shut down for prolonged maintenance and until the countrys nuclear policy becomes clear.

The consequential increased demand on shipping put an upward stress on charter rates to approximately US$ 100 000 per day, with virtually the whole fleet deployed. In turn, Asian spot LNG prices became much higher than Atlantic Basin markets with premia of US$ 8 - 13/mmBTU. These price differentials are some of the highest levels we have seen for some time and they look set to remain for the short term at least.

LNG sellers demonstrated that with the growing volume of divertible LNG and spare shipping, it can be effective in responding to sudden supply challenges and provide supply reliability when and where it is most needed.

New supply capacity came onstream in Qatar; all the new mega trains have now reached (and exceeded) their design outputs. In total, Qatar added 19.5 million tpy of new supply to the market. Short term LNG sales rose to approximately 20% (48 million t) of the global market and last year was a year of high value arbitrage trading for the market players who, by contract, control the destination of the LNG they purchase. Commercial opportunities to import and re-export from the USA at regas terminals in Louisiana and Texas continued and indeed similar activities developed in Mexico, Belgium and Spain. Overall, 1.5 million t of LNG was re-exported in the first nine months of the year.

Pat Roberts, LNG-Worldwide Ltd*,

UK, looks back at a successful year for the

global LNG sector.

LNG_Spring2012_18-24.indd 19 19/03/2012 08:57


Market fundamentals will be more complex to assess At a macro level, the Eurozone crisis, the Japanese earthquake, its impact on the nuclear industry worldwide, and the Arab Spring all demonstrate that we operate in a complex environment for forecasting LNG supply, demand and pricing developments. More dynamic forecasting is needed to incorporate all the uncertainties arising from the business environment. This is becoming an important feature of our business.

On the demand side, the worlds largest LNG consumer, Japan, suddenly has a lot of variability in its demand, varying from 63 - 92 million tpy depending on assumptions over the period 2012 - 2020. Also, most of the new LNG demand growth is associated with countries in Asia whose demand is very sensitive to price. Depending on outright pricing, wide variations in demand are evident in countries like China and India. Overall, demand forecasting will be more complicated and more variable. To make it internally consistent, it is necessary now to recognise there is tiered LNG demand. Some LNG is must buy whereas other demand is price sensitive, and sustained high prices will limit the development of much of the new market demand. Coupled with the fact that the supply of new LNG is linked to a variety of projects with very different cost stacks, it means that simple volume charts showing supply and demand growth are of little use in determining the commercial features that will drive supply and demand and in devising robust business plans.

Throughout the year, the prospect of North American LNG exports has been growing as a credible option to resolve some of the key supply, demand and pricing uncertainties. We end the year with the Cheniere project at Sabine Pass having signed three conditional agreements with BG Group, Gas Natural Fenosa and GAIL (India) Ltd.

As a result, a new round of economic and regulatory risk modelling needs to be undertaken before we can assess the volume of North American LNG supply that could be expected to develop by 2020.

Gas pricing differentials between markets was a common theme. Understanding US shale economics, new LNG cost stacks and the ability of markets to support prices linked to oil have all been discussed. Throughout the year the price differentials have widened. It is this inter-regional spread that supports long term North American exports. Charles River Associates coined the phrases

Pacific Shale Spreads and Atlantic Shale Spreads to refer to the arbitrages between Asia and the US, and Europe and the US, gas markets. It has been too early to forecast the consequences on these spreads as North American exports develop, but it is clear there are definite price risks to manage, either through the physical business or through locking in future spreads by hedging.

In addition, it raises the issue of whether North American exports will lead to the US Henry Hub index developing as a new market index for LNG prices in other regions.

Demand growth to 2020 is expected to remain strong, but needs to be matched with new supply cost control and continual commercial innovation The industry has doubled roughly every 10 years and the prospects remain good that it will almost double again to 400 million tpy by 2020. A new round of expansion is well underway with 12 projects (76 million tpy) currently under construction, mostly centred on Asia Pacific supply (Australia) to Asian markets. There are also several other projects that may mature. Globally, projects totalling 280 million tpy have been announced as being under active development and include Tanzania and Mozambique as potential new sources. In 2012, some 70 million tpy of projects are targeting a final investment decision (FID) and the majority is focusing on supplying the Asian market. It is difficult to see how all these projects can take FID further in 2012. So the race is on.

However, positive demand prospects alone will not drive the business forward at its recent growth rates. Not least, since much of the new LNG demand growth is expected to be in Asias price sensitive markets. Collectively, the industry will need continuous improvements coming from technological and commercial innovations to deliver a cost-effective gas supply to customers. In addition, LNG will need to be price competitive with other gas supplies and other fuels to ensure it builds market share.

This is nothing new of course, but the current global uncertain economic times and sustained energy inflation makes supply cost control harder. Yet it is increasingly central to any credible investment plan. The LNG sector is collectively relying on two major pillars of support for its plans:

Technical and commercial innovationsThe LNG industry has been innovating continuously over the last 50 years. It will remain a key success factor for the future. 2011 has been an outstanding year for technical innovation. Notably:

z Shell has taken FID on its Prelude floating liquefaction project in Northwest Australia to prove its concept of a mobile liquefaction plant as a way of monetising smaller scale reserves.

z Two more coalbed methane sourced LNG plants have taken FID in Queensland (Gladstone LNG and APLNG).

z Excelerate Energy has considerably shortened the lead times to complete an FSRU project in Argentina.

z Small-scale liquefaction (and modular builds) are under active development.

Figure 1. Summits throughout the year questioned the speed with which more trading would develop.

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z Technically challenging Arctic plans are under development. z US regas terminals are developing plans to add liquefaction

capacity and provide bi-directional terminals.

The outlook presented last year was more innovation and new supply growth of 150 million tpy by 2020. Within this there is likely to be a variety of technologies and ongoing cost control. Unconventional feed gas for LNG plants looks as though it will grow progressively over the period.

In parallel to technical innovations, a sustained drive to develop innovative commercial propositions is needed. Companies who can successfully combine cost-effective supply growth, whilst retaining as much commercial flexibility in their transactions will develop an important competitive edge. The word flexibility has been central to everyones aspired business model. It has been the value added feature in several growth plans for buyers and sellers alike.

Flexibility to divert long term sales of LNG to other markets, or trade some LNG on a spot basis is likely to lead to an increase in market liquidity of both volumes and players open to trade. However, the barriers to LNG being a global traded commodity remain strong. It would need a fully liquid market, spare open access at terminals, spare shipping, standardised contracts and balanced risks and rewards. These criteria are not all in place, but there are signs the markets are adapting to incorporate more short term sales.

Summits throughout the year questioned the speed with which more trading would develop. Times are changing and

countries like Singapore and Thailand are building spare regasification capacity to offer new services to customers, whilst several LNG companies are opening regional offices in Asia to prepare for more short term trading and optimisation activities.

Challenges aheadIt is clear that the next phase of growth isnt going to be all plain sailing. As the industry grows, the challenges facing the industry are evident and serious:

z Delivering the current 12 new LNG supply projects under construction on time and on budget; some have already announced they are delayed and over budget.

z This level of concurrent building has never happened before, particularly since seven of the projects (53 million tpy) are in Australia.

z The new supply projects are getting more complex. For example, they involve large scale CO2 sequestration, coalbed methane as feed gas and floating liquefaction. In addition, the Australian projects are competing with each other for labour and resources.

Whilst these challenges are being addressed, a further challenge will be the impact that unconventional gas may have on the need for new LNG. The view that all gas is good voiced by a variety of IOCs masks the fact that some LNG growth may be stymied by the development of unconventional gas supplied by pipeline. Notably in China (one of the most important markets for new LNG growth), growth in unconventional gas supply has largely been assumed will take place post-2020. However, if this were advanced successfully, it could substantially reduce Chinas need for LNG and significantly change demand assumptions.

Successful business models (for both buyers and sellers) will incorporate flexibility and be fast to react to change.

The general consensus in 2011 was that flexible business models would be the best means of managing uncertainty for buyers and sellers alike and generate and protect value. At first sight, it is difficult to imagine how both buyers and sellers can have flexibility in their LNG business models at the same time. Yet each party claims this is needed if their growth targets are going to be met. Market price differentials over the last seven years have made everyone aware of the tremendous value available from arbitrage if companies have access to sufficient infrastructure and divertible LNG to respond quickly to short term spikes in demand.

Sellers have made it clear that flexibility comes at a price for buyers. The tension we will be seeing over the next few years will be the extent to which both buyers and sellers can extract value from their portfolios and manage risks effectively. Success isnt just going to be measured by price alone, but also the wider operational flexibility negotiated in the supply arrangements.

Much of the new buying interest will come from buyers who are likely to find the traditional terms of long term purchase quite onerous, such as: high take or pay, limited operational flexibility, limited destination flexibility and long lead times for scheduling cargos. LNG exports from North America operating on a FOB business model may address many of the concerns of new buyers. However, it is clear that flexibility will come at a price. In this case, the long term monthly payments of a fixed capacity charge. It is too early to say which players

Figure 3. Last year was a successful one for the global LNG sector.

Figure 2. Industry leaders gathered at the annual CWC World LNG Summit in November last year.

LNG_Spring2012_18-24.indd 22 16/03/2012 15:11

are best suited to manage these risks, but the companies that can manage the shale spread price risks, could see a fast track approach to securing new LNG.

Throughout 2011, summit speakers from across the value chain described how their business models are being developed to operate across a broad supply chain. The evidence of this happening in 2011 comes from Chinese and Japanese companies taking more upstream positions in LNG supply projects. More similar activity is expected in 2012. The midstream is another area where we should expect new business to develop. 2012 - 2013 will see midstream players offering infrastructure services (provided capital costs can be covered adequately). As a result, new liquefaction tolling, regas terminal storage break bulk, reloads and perhaps bunkering for LNG fuelled ships services are likely to grow.

Some wildcards to look out for in 2012Some wildcards which could seriously affect the future LNG supply and demand growth were identified in 2011.

Supply side issues which may surface:

z Unconventional gas goes global much faster than had been thought. Examples were China and Indonesia being two countries whose upstream developments could change the supply/demand balance in Asia faster than expected.

z EPC costs stay stubbornly high, slowing new growth and stalling the development of price sensitive markets.

Demand side issues which may surface:

z A double dip recession particularly starting in Europe and impacting the global economy.

z Consumers who are continually experiencing rising fuel bills, a rising US dollar vs. the Euro, may respond through more energy efficiency and savings than currently forecast.

To conclude, it is evident the industry has to live with more uncertainty, change and risk. Yet as an energy sector, LNG remains a very attractive energy business. The talent pool is increasing and the prospect of working in an industry where LNG is a big part of the energy solution is key to making the industry a premium place to work.

Note*Pat Roberts works closely with CWCs gas and LNG Summits (LNG World Series: Asia Pacific Summit, LNG Americas and World LNG Summit) which aim to bring together the industrys leading players to address the key issues facing the sector, developing knowledge and providing commercial solutions.

Figure 4. The outlook presented last year was more innovation and new supply growth of 150 million tpy by 2020.

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LNG is a marine industry, and yet, with the exception of a few reception terminals located close to shore, all LNG facilities are onshore. All offshore gas fields in production today have been developed by piping the gas to an onshore plant where the gas is cleaned up and then liquefied when LNG is the desired product. This is about to change.

What is FLNG?FLNG is the gas equivalent of an oil FPSO such as Akpo. The designs use a purpose built ship-shaped hull that can store large amounts of LNG at approximately -160 C and atmospheric pressure in highly insulated tanks. All facilities for receiving the raw gas, treating it to remove undesirable components and finally liquefying it are located in the topsides. The LNG is offloaded to shuttle tankers through specially developed systems designed to operate safely in the open sea.

FLNGs time to shineVictor Alessandrini and Mohamed Ould Bamba, Technip, Europe, discuss the increasing importance of the FLNG concept for offshore gas production.

Figure 1. Prelude FLNG (Courtesy of

Shell).

LNG_Spring2012_25-29.indd 25 13/03/2012 10:49


Why now?The possibility of transferring a liquefaction plant to a floating facility located directly above the offshore gas field was first seriously considered 35 years ago, but it was more a matter of wishful thinking, since, at that time, there were no subsea wellheads, no flexible risers, no multipath rotary joints, no knowledge of motion effects on process equipment, no FPSOs and no known means of transferring LNG to a shuttle tanker out at sea. The requirement for innovation in the 1970s was just too high but the progress made in sister industries has meant that as time has passed, these technological barriers have progressively been lifted, creating the conditions that led to the advent of FLNG today:

z Subsea production of oil and gas and FPSOs have become mature technologies and several mega FPSOs (topsides >30 000 t) are in operation.

z Computer modelling of floating structures and the effects of motion have progressed enormously.

z Open sea transfer of LNG has now been made possible with several qualified technologies such as Technips Amplified LNG loading system (ALLS).

In parallel with technological progress, other trends have developed that are favourable to FLNG:

z New fields tend to be in deeper water and further from the coast as gas reservoirs in shallow waters have been depleted. This makes a pipeline solution much more expensive. For example, the pre-salt fields in Brazil are typically 300 km offshore in more than 2000 m of water. Pipelines of up to 1000 km are planned in Australian waters.

z Rising HSE and labour standards are raising the cost of construction in remote areas. LNG trains are now among the largest industrial plants, and building them onshore in remote locations is increasingly costly, requiring many skilled tradesmen and supervisory staff recruited from a global market.

Safer, faster, cheaper The principle advantages of FLNG are:

z Better HSE construction takes place in a highly organised shipyard that will benefit from repeat orders.

z Shorter schedules, no site preparation, no onshore permitting, and no community relocation.

z Lower project cost: y Building an FLNG vessel in a shipyard provides access to

highly skilled and productive labour.

y No long distance pipelines. y No marine terminal. y No site infrastructure such as roads, residential areas

or temporary facilities such as construction jetties, workshops, housing.

Challenges remainFLNG presents numerous new challenges that have all been addressed and at least one solution found. Among the key technical challenges, the following can be highlighted:

The effect of motion on processing Whilst oil and associated gas systems have operated successfully on floating systems for over 25 years, LNG process equipment is more sensitive to motion.

Motion mainly affects the operation of equipment where there is liquid distribution under the effect of gravity. When accelerations due to motion are superimposed, liquid misdistribution could occur, potentially leading to a loss of mass or heat transfer efficiency, off-specification product, process upsets, etc.

For columns, the industry has feedback from floating processing platforms and laboratory tests. Structured packing is favoured. Distribution of liquid is critical, for example; shallow open pan distributors are avoided. Specialist suppliers in internals for mass transfer have done a lot of work on this topic by themselves and with the process technology licensors. Technips first specially designed fractionation columns for the

NGL extraction and LPG fractionation units of the Nkossa project (Congo) have been in operation for over 15 years. Other examples are fractionation columns on the Sanha LPG FPSO offshore Angola and the Belanak FPSO in the Natuna Sea, Indonesia.

However, the recognised challenge that is specific to liquefaction is distribution of liquid over all the tubes of the coil wound exchangers used to condense and sub cool the LNG.

To minimise the effects of motion, the columns, critical tanks and cryogenic heat exchangers are located as close as possible to the ships centre of gravity. Internal baffles minimise the sloshing of liquids, and special distributors minimise the risk of misdistribution of liquid in the equipment. When appropriate, motion-insensitive gas phase processes are selected. Energy efficient processes of this type have been developed.

The design of topside equipment requires the collaboration of an entire team Figure 2. Total Akpo FPSO.

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of naval architects, piping, process and equipment engineers, critical equipment suppliers, installation specialists and engineers skilled in advanced numerical modelling.

Accelerations are quantified and loads on mechanical equipment checked with vendors. The effects of hull motions on gas/liquid separation in process equipment are studied when necessary with process licensors and suppliers.

Large gas volumes through swivelsFLNG requires larger volumes of high pressure gas to be brought onto the vessel deck than previously experienced. In a harsh environment the FLNG vessel must weathervane to minimise motions and mooring loads. With oil FPSOs the proven solution is generally a swivel device that has multiple flow paths for the gas, chemicals, hydraulic fluid and signals for operation of the wells.

Cargo containment systemThere are two acceptable technologies available in the market: membrane tanks (commonly used for LNG carriers) and SPB tanks (fewer references, but originally developed for arduous service). A cargo containment system must resist sloshing loads in partially filled tanks and be able to operate for 20 - 30 years without dry docking. There is a tendency to consider that solutions with membrane tanks present some cost and schedule advantages. The ultimate choice is usually a question of client preference.

LNG offloadingTwo configurations are today considered as applicable:

z Side-by-side. z Tandem.

The availability of side-by-side loading using articulated loading arms is reduced compared to a shore berth operation. The governing criteria for availability are the prevailing metocean conditions, especially the wave conditions (height and period),

wind and relative heading. As for oil side-by-side operations (see OCIMF guides), typical limits appear when the wave height exceeds 3 m for head sea conditions. Again, availability very much depends on site conditions and on the presence of acceptable wave conditions that are persistent enough to cover the entire length of the offloading operation.

The vendors have had to demonstrate that their technology can be operated safely in these offshore conditions and have had to assess the quantity of reinforcement to be added on LNG carrier manifolds to sustain

the loads developed during operation. Specific locations, such as Brazil, require tandem systems due to frequent cross sea conditions.

Using expertise combined from flexible pipe design/ manufacturing, LNG and offshore expertise, Technip developed ALLS, which uses Technips cryogenic flexible pipe to allow ship-to-ship LNG transfer in the open sea. When it is reel-mounted, the pipe is installed on the stern of the FLNG vessel to allow it to tandem offload its liquefied gas cargo onto the bow of a modified LNG tanker.

Technip is also developing a floating hose that will enable unmodified LNG carriers to receive the LNG cargo via their mid-ship manifolds whilst still in a tandem configuration.

Safety: cryogenic and hazardous fluid risksThe challenge for the layout of an FLNG facility is the large process area and the relatively high congestion of modules in a reduced footprint. A risk-based approach is needed to assess potential consequences and associated frequencies to derive appropriate safeguards and mitigation measures.

Among process risks (fire and explosion) and non-process risks (ship collision, dropped object, etc.), the risk of exposure of personnel and the facility itself to cryogenic fluids in the event of a spill is a hazard that is specific to FLNG.

The objective is to develop the design to minimise the potential for escalation and promote safe escape and evacuation with provisions for rescue of personnel in the event of major accidents.

Naval architectureNaval architects have to address several new challenges:

z Sheer size: larger than existing FPSOs. z Harsh environmental conditions. z Weathervaning systems suitable for extreme storms. z LNG cryogenic transfer between two floating units in the

open sea.

Figure 3. Total Nkossa FPU.

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z Accommodating a wide range of LNG and LPG carriers.

The development of the turret, mooring and riser system requires the combined marine/metocean expertise of all parties including the topside contractor, operator turret contractor and shipyard.

Design solutions can be confirmed with the help of two tests:

z Wind tunnel tests to derive the wind and current loads on the FLNG with and without the LNG carriers present.

z Wave basin model tests with FLNG and LNG carriers covering:

y Mooring in design storm conditions. y Decay and motion response tests. y Berthing and mooring and the equipment

required between the two vessels.

y The loads generated when towing.

Shells FLNGThe LNG world changed when in May last year, the Technip Samsung Consortium (TSC) was given notice to proceed with the construction of Prelude FLNG, the first floating LNG facility in the world, to be located offshore Australia. This key chapter of the FLNG story starts when in mid-2009, Shell awarded the TSC a 15 year Master Agreement for the design, construction and installation of multiple FLNG facilities. Technip, acting as leader, and its partner, Samsung Heavy Industries (SHI), first executed the FEED for a generic solution with a capacity of 3.5 million tpy. In March 2010, Shell awarded the contracts for the FEED and EPCI for Prelude with the latter becoming effective after FID.

The Shell Prelude FLNG facility will be the largest floating facility in the world, at 488 m from bow to stern; longer than four soccer fields laid end to end. When fully loaded, it will weigh approximately 600 000 t; roughly six times as much as the largest aircraft carrier. Some 260 000 t of that weight will consist of steel; approximately five times the amount of steel used to build the Sydney Harbour Bridge. It is designed to operate under harsh ocean conditions and to process a wide range of gas compositions. The facilities will be capable of producing 3.5 million tpy of LNG, plus associated LPG and condensate with total liquid production potential of over 5 million tpy.

Other FLNG programmesMany operators are now considering offshore gas field developments with FLNG. Some observers consider that about 5% of LNG production could be produced offshore by 2020.

Floating LNG is now a viable alternative to traditional onshore LNG plants, providing a commercially and environmentally attractive approach for monetisation of offshore gas fields.

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Highly polluting or expensive fossil fuels such as heavy fuel oil (HFO) or diesel oil are nowadays used for electric power generation in isolated power plants, e.g. on islands. The use of natural gas as a fuel is a cost-efficient alternative and at the same time enables significant reductions in atmospheric pollution.On the other hand, isolated locations are typically unconnected to natural gas pipeline grids due to challenging terrain or losses in economy of scale due to

FLOATING BETWEEN ISLANDSOlaf Beyer, TGE Marine Gas Engineering GmbH, Germany, discusses the provision of engineering services to provide LNG infrastructure for Guadeloupe and Martinique.

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small volumes. Existing LNG infrastructure is sized to handle much larger volumes than needed for these consumers.

TGE Marine Gas Engineering has developed cost-efficient small to mid-scale import solutions comprising shuttle tankers and floating storage facilities for such markets.

TGE Marines fellow company Gasfin Development SA is currently evolving an LNG infrastructure project with EDF (Eletricit de France) to supply natural gas to EDFs power generation facilities in Martinique and Guadeloupe. Gasfin is an independent developer and infrastructure service provider of mid-scale LNG and natural gas solutions.

TGE Marine has been selected by Gasfin to supply the FEED package comprising hull and gas handling system design for the shuttle tanker and the FSRUs.

Bureau Veritas (BV) acting through its subsidiary Tecnitas was identified as the third party technical advisor for the project and has carried out risk studies and independent reviews and assessments to assure a high level of safety. BV will also be the approving classification society for the FSRUs and the shuttle carrier.

The project objective is to deliver natural gas to the power plants as a replacement fuel for HFO. For that, the existing diesel engines will be retrofitted to dual fuel engines. In addition to realising material cost savings, the fuel switch will enable the plants to reduce emissions of CO2 and NOx by up to

30% and 85% respectively. Sulfur and particulate emissions will be virtually eliminated. High overall availability of the power generation system is assured, as the existing fuel system acts as reserve fuel in case of LNG supply shortage.

The objective was to design an integrated LNG delivery service scheme for both islands using right sized infrastructure based on proven and safe technology. The infrastructure will comprise a new mid-sized 20 000 m3 LNG carrier and two purpose built 25 000 m3 floating storage and regasification units (FSRUs). It is envisaged to supply LNG directly from Trinidad or to re-export via one of the regional terminals. The FSRUs will be moored close to shore in the vicinity of the power plants. The LNG will be vapourised on the FSRUs and sent to the consumers via flexible risers and a short subsea pipeline.

When implemented, this project will be a world first in terms of using floating LNG infrastructure to facilitate economically viable international deliveries of LNG and supply natural gas to markets of this size, which presently do not have a viable means of accessing international markets.

The envisaged supply scheme provides a continuous supply over a period of more than two weeks without reloading based on annual LNG demands of approximately 200 000 t for each of the islands.

In Guadeloupe, the FSRU will be moored in a protected bay approximately 6 km offshore the Point--Pitre power plant at 25 m water depth.

The favoured location for the Martinique FSRU is situated on the calm, leeward side of the island approximately 2 km offshore the Bellefontaine power plant at a water depth of 350 m. Both sites are located at a safe distance from marine traffic lanes and the public.

Figure 2. FSRU receiving LNG.

Figure 1. FSRU portside.

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Technical concept: FSRU hullThe FSRUs will be designed as a permanent installed (non- propelled) offshore service barge with an uninterrupted service life of 25 years.

z The LNG will be stored in two cylindrical tanks arranged parallel along the vessels longitudinal axis.

z At both locations, the FSRUs will be permanently moored to the seabed by a spread mooring system. Anchor chains will secure the vessels to the seabed using high holding drag embedment anchors or driven piles. The system is designed to withstand severe hurricane conditions with a 100 year return period, which has been derived from site-specific metocean data.

z The hull of the FSRU is a single deck design with a deckhouse at its aft end. The deckhouse accommodates service and control rooms as well as living quarters. In the cargo area the hull will have a double bottom and double side shell. The general subdivision of the vessel is in accordance with the requirements of intact and damage stability criteria of the IGC Code.

z The main dimensions are 116 m overall length, 38.8 m breadth and a scantling draught of 8.60 m.

z The shuttle carrier will berth at the FSRU in a side-to-side modus. To assist in a safe approach of the LNG carrier, the FSRU will be equipped with a suitable fendering and a berthing aid system. Quick release hooks will ensure unobstructed departure of the carrier in an emergency.

Technical concept: FSRU processThe general design basis with few exceptions as detailed below, is valid for both Martinique and Guadeloupe. The intent is that both units will have a common design, with modifications limited to the mooring and subsea system.

z The storage volume of 25 000 m3 covers approximately 2.5 weeks sendout at the normal expected annual consumption.

z The LNG transfer system will consist of two loading arms, one liquid arm and one vapour return arm at portside. The vapour return arm will be designed as a spare liquid loading arm. An alternative solution for the transfer of LNG in the form of cryogenic flexible hoses is being investigated.

z The FSRU will have two cylindrical IMO type C storage tanks, i.e. self-supporting pressure vessels of 12 500 m3 volume each, which offer specific advantages. There is no secondary barrier required, there are no restrictions regarding partial filling allowing the FSRU an unobstructed top deck for the arrangement of the vaporiser process. Furthermore, the elevated working pressure provides a higher operational flexibility.

z In case of prolonged sendout interruptions, e.g. due to hurricanes, the tanks can retain the boil-off gas, which is permanently generated in the storage tank by inevitable ambient heat ingress, for three to 10 weeks, depending on the tank filling level.

z TGE Marine owns a patent for LNG specific design, which enhances a typical type C LPG tank bearing arrangement to withstand the higher thermal movements in LNG service. Unlike typical LPG/ethylene tank foundations, the patent

incorporates the foundation to allow uniform shrinkage and load distribution.

z The tanks will be equipped with submerged motor type sendout pumps with variable speed drive.

z Ambient air vaporisers (AAV), which use ambient air as heat source, have been chosen as a means for regasification of the LNG at a pressure of 15 barg.

z The LNG flows through the stainless steel pipes of the AAV and heat is transferred directly from the surrounding air through the fins of the vapourisers to the cold LNG.

z The vapourised gas is delivered to the consumers onshore via a flexible riser and a subsea pipeline. A branch flow is taken from the sendout stream as fuel gas for the FSRU`s power generation. The boil-off gas is removed from the tanks by piston compressors and added to the sendout stream.

Environmental impactThe use of heat from ambient air results in lower operating costs and lower environmental impact than other regasification methods like ope

Documents

LNG Industry March 2012