Why small to mid-scale FLNG is the future?

#1 · October 18, 2023, 8:28 pm

Quote from chief_editor on October 18, 2023, 8:28 pm

Photo: Technip Energies

Floating liquefied natural gas (FLNG) is entering a new phase focused on small to mid-scale facilities in the 1-3 million tonnes per annum (MTPA) capacity range. Whereas first-generation FLNG projects were massive bespoke platforms exceeding 5 MTPA, the industry is shifting towards standardized, modular designs on a smaller scale. This transition is driven by the compelling advantages of mid-scale FLNG including lower costs, speedier deployment, operational flexibility, and access to previously marginal reserves.

Lower Upfront Capital Costs

Small to mid-scale FLNG vessels in the 1-3 MTPA range have total capex costs typically between $1.5 - 3 billion. This is dramatically less than the multi-billion dollar price tags of the initial mega-projects. For example, the mammoth Prelude FLNG vessel developed by Shell cost over $10 billion and took over 5 years to construct. Its huge capacity of 3.6 MTPA required gigantic production trains and liquefaction modules to achieve economies of scale.

In contrast, a mid-scale vessel with just 1-2 MTPA of liquefaction can be built with much smaller modular equipment at a fraction of the cost. Standardizing the design also avoids the need for extensive custom engineering and modifications required on one-off vessels like Prelude. The end result is faster delivery of a far more affordable FLNG facility.

Access to Smaller Reserves

The massive capacity of large FLNG vessels mandates that they tap into equally massive gas fields containing several trillion cubic feet of reserves. Smaller fields would fail to utilize all the liquefaction capacity. Mid-scale FLNG provides an optimized solution to tap smaller offshore fields in the 0.3 - 1 TCF range which were previously considered uneconomical for development.

Unlocking these smaller stranded assets becomes viable with a right-sized production capacity between 1-3 MTPA. With lower production thresholds, mid-scale FLNG can profitably monetize fields containing as little as 200 billion cubic feet of gas. Hundreds of such stranded fields exist close to shore and can now be viably developed.

Accelerated Construction Timelines

Another advantage of opting for small to mid-scale FLNG is the significantly shorter construction timeline compared to larger projects. While mega-projects like Shell's Prelude took over 5 years from the shipyard order to commencement of operations, a standardized mid-scale FLNG vessel can be constructed and commissioned in just over 3 years.

The modular approach that repeats proven designs enables assembly line style manufacturing. This avoids the delays and risk of custom projects having to tailor every aspect from scratch. Shorter time to first gas translates to quicker capital recovery and more favorable project economics.

Improved Financing Prospects

At capex levels between $1.5 - 3 billion, small to mid-scale FLNG projects are far more manageable to finance than the multi-billion dollar behemoths. The costs can be borne by a wider range of companies, including independents and mid-cap players. Many operators that could not fund a >$5 billion FLNG project on their balance sheet can readily pursue $2 billion developments.

Moreover, smaller outlays attract a broader pool of partners and third-party investors. This improves prospects for achieving final investment decision, which has been a challenge for some larger FLNG projects. The improved risk-reward balance of mid-scale facilities is reflected in the number of projects now reaching FID compared to earlier struggles.

Operational Flexibility

Mid-scale FLNG vessels have much more flexibility around where they operate during the project lifecycle. With liquefaction capacity of 1-3 MTPA, they can produce from marginal fields that would be unfeasible for massive vessels to dedicate their capacity towards. The mid-scale facility absorbs the initial production plateau from a smaller field before being able to disconnect and move on to the next prospect.

This flexibility to sequentially move between fields as they deplete optimizes utilization of the asset over its lifespan. Smaller FLNG vessels can chase near-term cash flows from several mid-size fields rather than banking on a single giant reserve. Operators can shuffle mid-scale units between fields to sustain total gas output.

Emerging Market Applications

Small-scale FLNG opens up natural gas monetization options in emerging markets that lack extensive infrastructure for land-based liquefaction. In locations like Africa and Southeast Asia, localized FLNG facilities avoid the need for costly pipelines crossing borders and insecure regions. Operators can position small FLNG vessels near offshore gas reserves to directly supply nearby demand centers.

A 1-2 MTPA FLNG vessel is adequate to serve gas-starved domestic and regional markets. This unlocks gas monetization opportunities not feasible for large capacity conventional projects focused on exports. Small-scale FLNG can accelerate gas commercialization in under-developed regions.

Deepwater Capability

Compact mid-scale FLNG facilities have much shallower drafts than their larger counterparts, enabling them to access ultra-deepwater fields. Giant FLNG vessels require massive tanks and hull capacity leading to drafts up to 30 meters. This prohibits development of promising reserves in water depths exceeding 2000 meters.

Smaller FLNG options have drafts as little as 11 meters, broadening the number of deepwater prospects within reach. Unlocking these extremely remote ultra-deepwater resources further expands the addressable market for mid-scale FLNG vessels. Optimal matching of capability and reservoir enables profitable development.

The Way Forward

FLNG technology is transitioning from the pioneering phase of large bespoke platforms to an era focused on modular mid-scale facilities built via standardized designs. This shift to assembly line manufacturing will accelerate commissioning, reduce costs, and improve competitiveness across a wider range of offshore gas fields.

Leading players are already embracing small to mid-scale FLNG including Golar LNG, Exmar, Black & Veatch, and Lloyds Register. The winning strategy will involve repeatable modular construction, capitalizing on learnings from earlier projects to drive down budgets and schedules.

As the industry matures, mid-scale FLNG will become the default option for most situations except the very largest offshore gas fields. Unlocking smaller reservoirs quicker and at lower cost will be the key to unlocking the full potential of FLNG technology. Small and mid-sized units will dominate the next chapter in offshore gas development.

Photo: Technip Energies

Floating liquefied natural gas (FLNG) is entering a new phase focused on small to mid-scale facilities in the 1-3 million tonnes per annum (MTPA) capacity range. Whereas first-generation FLNG projects were massive bespoke platforms exceeding 5 MTPA, the industry is shifting towards standardized, modular designs on a smaller scale. This transition is driven by the compelling advantages of mid-scale FLNG including lower costs, speedier deployment, operational flexibility, and access to previously marginal reserves.

Lower Upfront Capital Costs

Small to mid-scale FLNG vessels in the 1-3 MTPA range have total capex costs typically between $1.5 - 3 billion. This is dramatically less than the multi-billion dollar price tags of the initial mega-projects. For example, the mammoth Prelude FLNG vessel developed by Shell cost over $10 billion and took over 5 years to construct. Its huge capacity of 3.6 MTPA required gigantic production trains and liquefaction modules to achieve economies of scale.

In contrast, a mid-scale vessel with just 1-2 MTPA of liquefaction can be built with much smaller modular equipment at a fraction of the cost. Standardizing the design also avoids the need for extensive custom engineering and modifications required on one-off vessels like Prelude. The end result is faster delivery of a far more affordable FLNG facility.

Access to Smaller Reserves

The massive capacity of large FLNG vessels mandates that they tap into equally massive gas fields containing several trillion cubic feet of reserves. Smaller fields would fail to utilize all the liquefaction capacity. Mid-scale FLNG provides an optimized solution to tap smaller offshore fields in the 0.3 - 1 TCF range which were previously considered uneconomical for development.

Unlocking these smaller stranded assets becomes viable with a right-sized production capacity between 1-3 MTPA. With lower production thresholds, mid-scale FLNG can profitably monetize fields containing as little as 200 billion cubic feet of gas. Hundreds of such stranded fields exist close to shore and can now be viably developed.

Accelerated Construction Timelines

Another advantage of opting for small to mid-scale FLNG is the significantly shorter construction timeline compared to larger projects. While mega-projects like Shell's Prelude took over 5 years from the shipyard order to commencement of operations, a standardized mid-scale FLNG vessel can be constructed and commissioned in just over 3 years.

The modular approach that repeats proven designs enables assembly line style manufacturing. This avoids the delays and risk of custom projects having to tailor every aspect from scratch. Shorter time to first gas translates to quicker capital recovery and more favorable project economics.

Improved Financing Prospects

At capex levels between $1.5 - 3 billion, small to mid-scale FLNG projects are far more manageable to finance than the multi-billion dollar behemoths. The costs can be borne by a wider range of companies, including independents and mid-cap players. Many operators that could not fund a >$5 billion FLNG project on their balance sheet can readily pursue $2 billion developments.

Moreover, smaller outlays attract a broader pool of partners and third-party investors. This improves prospects for achieving final investment decision, which has been a challenge for some larger FLNG projects. The improved risk-reward balance of mid-scale facilities is reflected in the number of projects now reaching FID compared to earlier struggles.

Operational Flexibility

Mid-scale FLNG vessels have much more flexibility around where they operate during the project lifecycle. With liquefaction capacity of 1-3 MTPA, they can produce from marginal fields that would be unfeasible for massive vessels to dedicate their capacity towards. The mid-scale facility absorbs the initial production plateau from a smaller field before being able to disconnect and move on to the next prospect.

This flexibility to sequentially move between fields as they deplete optimizes utilization of the asset over its lifespan. Smaller FLNG vessels can chase near-term cash flows from several mid-size fields rather than banking on a single giant reserve. Operators can shuffle mid-scale units between fields to sustain total gas output.

Emerging Market Applications

Small-scale FLNG opens up natural gas monetization options in emerging markets that lack extensive infrastructure for land-based liquefaction. In locations like Africa and Southeast Asia, localized FLNG facilities avoid the need for costly pipelines crossing borders and insecure regions. Operators can position small FLNG vessels near offshore gas reserves to directly supply nearby demand centers.

A 1-2 MTPA FLNG vessel is adequate to serve gas-starved domestic and regional markets. This unlocks gas monetization opportunities not feasible for large capacity conventional projects focused on exports. Small-scale FLNG can accelerate gas commercialization in under-developed regions.

Deepwater Capability

Compact mid-scale FLNG facilities have much shallower drafts than their larger counterparts, enabling them to access ultra-deepwater fields. Giant FLNG vessels require massive tanks and hull capacity leading to drafts up to 30 meters. This prohibits development of promising reserves in water depths exceeding 2000 meters.

Smaller FLNG options have drafts as little as 11 meters, broadening the number of deepwater prospects within reach. Unlocking these extremely remote ultra-deepwater resources further expands the addressable market for mid-scale FLNG vessels. Optimal matching of capability and reservoir enables profitable development.

The Way Forward

FLNG technology is transitioning from the pioneering phase of large bespoke platforms to an era focused on modular mid-scale facilities built via standardized designs. This shift to assembly line manufacturing will accelerate commissioning, reduce costs, and improve competitiveness across a wider range of offshore gas fields.

Leading players are already embracing small to mid-scale FLNG including Golar LNG, Exmar, Black & Veatch, and Lloyds Register. The winning strategy will involve repeatable modular construction, capitalizing on learnings from earlier projects to drive down budgets and schedules.

As the industry matures, mid-scale FLNG will become the default option for most situations except the very largest offshore gas fields. Unlocking smaller reservoirs quicker and at lower cost will be the key to unlocking the full potential of FLNG technology. Small and mid-sized units will dominate the next chapter in offshore gas development.