Floating Liquefaction (FLNG): Potential for Wider Deployment

The softening of European hub prices and Asian LNG spot prices in early 2014, followed by the plunge in oil prices later that year has created an extremely challenging business environment for the LNG industry.  Current prices – whether spot or oil-indexed LNG contract prices – are well below levels recently regarded as necessary for projects to achieve FID.  Against this background, it is a testament to the resilience and adaptability of the LNG industry that it is embarking on an ‘experiment’ to test the hypothesis that FLNG provides a means by which stranded gas discoveries can be monetised and, perhaps more fundamentally, that with its shorter lead times, lower fabrication execution risk and the entrepreneurial vibrancy which comes from competing providers and approaches, FLNG could prove more generally to be more viable than conventional onshore liquefaction plant.  Following from his 2014 paper on LNG plant cost escalation, Brian Songhurst provides a comprehensive review of the state of play of FLNG, the competing approaches and the advantages and disadvantages compared with conventional onshore liquefaction.  Brian also hints of further potential technology step-out in FLNG once the first wave of projects is successfully commissioned.  The lessons of the post-2009 period have, it can be argued, demonstrated the need for the LNG industry to address both cost base and contractual price formation mechanisms if it is to remain a viable channel for the delivery of gas in the world’s fast growing markets.

Executive Summary

By: Brian Songhurst

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