Meeting LNG Demand with Floating Liquefaction Facilities

The past two years have seen a dramatic escalation of global natural gas liquefaction capacity. In 2010 alone, liquefied natural gas (LNG) trade jumped by a stunning 21%, to around 300 billion cubic meters (10,594 billion cubic feet, bcf), which amounts to 9% of the total global demand for gas, according to the International Energy Agency (IEA). Meanwhile, surplus gas on the market is “eroding fast,” IEA Senior Gas Analyst Anne-Sophie Corbeau told reporters in an LNG Q&A late last year, because as global gas markets tightened in 2010, global gas demand recovered by 7.4% and the “appetite for LNG (and spot prices) grew correspondingly in all regions.”

As a result, the IEA says that LNG imports are forecast to meet about a fifth of the total incremental demand. “Global LNG markets are expected to further tighten over the coming two-three years due to strong LNG demand, notably in Asia, and modest supply coming online,” Corbeau said. Besides China, India, and Taiwan, most demand will come from Southeast Asia—particularly countries like Thailand, Indonesia, Vietnam, Malaysia, and Singapore.

Among the world’s biggest LNG exporters are Qatar (whose liquefaction capacity was roughly one-quarter of global LNG liquefaction capacity as of mid-2011), Indonesia, Malaysia, Australia, and Algeria. But other countries have also recently entered the export scene, including Russia and Yemen in 2009 and Peru in 2010. Angola is expected to start exporting in 2012, followed by Papua New Guinea in 2014.

According to the U.S. Energy Information Administration’s (EIA’s) early release version of the Annual Energy Outlook 2012, the U.S. is also poised to become a net exporter of LNG starting in 2016—and an overall net exporter of natural gas in 2021 (Figure 3)—starting with an LNG export capacity of 1.1 bcf per day in 2016 and increasing by an additional 1.1 bcf per day in 2019. Cumulative U.S. LNG imports are also expected to drop, pegged on increased use of “LNG markets outside North America, strong domestic production, and relatively low U.S. natural gas prices in comparison with other global markets,” the EIA says.

3. A gas exporter? The U.S. Energy Information Administration’s (EIA’s) Annual Energy Outlook 2012 corrects the estimated unproved technically recoverable resource of shale gas in the U.S. to 482 trillion cubic feet—much less than the estimate of 827 trillion cubic feet made just a year ago. The agency foresees increases in natural gas production through 2035 attributable to increased shale gas production and improved drilling technologies. One surprising finding is that the U.S. will substantially lower natural gas imports and likely become an overall exporter of natural gas in 2021. The nation is expected to be a net pipeline exporter of natural gas in 2025 and an net exporter of LNG starting as soon as 2016. Source: EIA

In the meantime, the LNG demand surge has prompted some firms to consider implementing novel means of producing LNG. A number of companies, with Royal Dutch Shell leading the pack, are researching floating liquefied natural gas projects (FLNGs). Shell last year began building the Prelude project, a 534-yard-long, 81-yard-wide facility (Figure 4) that will be moored some 124 miles from the nearest land in Australia to produce gas from offshore fields and liquefy it onboard by cooling. It is expected to be operational by around 2017.

4. Testing the water. Shell is constructing a floating liquefied natural gas facility 124 miles off the northeastern coast of Australia on the Prelude gas field. Mitsubishi Heavy Industries will supply a 40-MW power generation system for the facility. Courtesy: Shell

Natural gas, chilled to –162C and shrunk in volume 600 times, will be shipped to land via oceangoing LNG carriers rather than being piped to a land-based plant, as has been done conventionally. The facility will include a host of technologies such as mechanical drive steam turbines—as opposed to gas turbines used in conventional land LNG facilities—to enable continuous long-term operation and easier maintenance.

The FLNG facility is expected to stay permanently moored at the Prelude gas field for about 25 years and later be used at other fields where Shell has interests.

Power equipment companies, too, have a stake in such facilities. Mitsubishi Heavy Industries in January said it would supply three compressor trains for gas recovery from gas wells and a 40-MW power generation system for the Prelude facility off the northwest coast of Australia.

—Sonal Patel is POWER’s senior writer.