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The FLNG resurgence

HOPE is not lost for the Scarborough and Bonaparte floating LNG projects as Woodside's move into the front-end engineering and design phase of the Browse FLNG project reinjects industry confidence into the technology's viability.

The FLNG resurgence

Francis Norman, the Western Australian division president of Engineers Australia, chaired the preparation of a comprehensive FLNG report for this organisation following industry workshops last year which unsurprisingly found that Perth was ideally placed to become a future hub of FLNG know-how.

The report was released in early December, during the early days of the oil price tumble which has seen Brent, West Texas Intermediate and Tapis crude prices still down considerably more than 40% from their highs of last year..

"Our FLNG expectations have probably gone up and down along with everyone else's," Norman told Energy News.

"More than a year ago, when we had the workshops, there was something like 7 or 8 potential FLNG facilities on horizon, oil was sitting at around about a $US100 a barrel and there was a lot more enthusiasm.

"Then as the oil price went down … the talk around FLNG went very quiet for a while."

This has changed with Woodside's various Browse project announcements of late. Engineers Australia saw there was a bit more faith in the potential of FLNG.

"To me and people I spoke to in Engineers Australia and engineering companies around town, it is showing that they are more confident, that there are opportunities for them go ahead, but obviously they still have got to get to the end of FEED," Norman said.

Another driver of confidence was the construction progress of Royal Dutch Shell's pioneering Prelude FLNG facility, also destined for WA's Browse Basin. While Shell personnel are notoriously guarded, there aren't any signs of anything amiss at this stage.

"Indications all seem to be that it is going well," Norman said.

"Shell is a huge investor in Browse [project with Woodside]. If they didn't think they were having successes with Prelude they probably wouldn't want to go too far with Browse just yet."

While Australia lacks the shipbuilding capability to construct the giant FLNG facilities proposed for offshore WA, there is also a lot of the engineering and design work going overseas too.

"There is always going to be that tension over whether we design it here, where the money is coming from, or whether we design it somewhere else," Norman said.

"But the other end, if you like, is once the design the construction is finished they are going to be on station for between 25-40 years.

"All the other businesses which are downstream as part of supply chain, the opportunity for them to be involved will grow once these facilities are up and running and they will be there for a generation or a generation and a half.

"Don't get me wrong, I would love to say the engineering is going to be done here, I really and truly would. But given where we are - that the engineering is not going to be done here - the best opportunities for us are to pursue the operations and maintenance support and everything else that goes with it as they start to come on and to try and grow as much of that business we can."

Shell has also flagged establishing its FLNG workforce in Perth.

"Shell will have the operations centre here and most of their engineering personnel involved in supporting operations will be based here in Perth," Norman said.

"Woodside are Perth-based … if we go ahead and get any of the others we are talking about their operations centres will be here as well."

This initial foothold is expected to give Perth a natural advantage compared to other parts of the world which could aim to become FLNG hubs.

"There is nothing quite like being able to pick the phone up and 20 minutes later meet with people who are involved in doing whatever the work is for you, face-to-face in an office or a coffee shop.You can't do that when they are somewhere else in the world and you definitely can't do that if they are located let's say 8-12 time zones away," Norman said.

As for the other FLNG projects in the state, Norman believes the ExxonMobil-BHP Billiton shared Scarborough project is the most promising followed by the Engie-led (formerly GDF Suez) Bonaparte project with Santos.

"The next cab off the rank after Browse would be Scarborough… and I think Exxon and BHP want to wait maybe until Prelude starts operating [2017]," he said.

"Exxon probably want to start waiting until they get a bit of cash revenue coming in from their investments in the Gorgon development as well."

In May the Bonaparte project, which was shelved in mid-2014, came back on the table with a cheaper barge-based, near-shore design.

Norman believes the Bonaparte FLNG design might end up being a platform which stands on the sea bed.

The fate of these FLNG proposals might not be entirely in their respective JV's hands either.

The engineering chief viewed that Prelude, and the smaller Petronas-led PFLNG 1 (first output in late 2015) projects will have to work and prove to be safe.

"They have to be viable and reliable. As long as we can achieve that as an industry that will give a lot more opportunity for future ones.

"If the first one or two have major problems and spend a lot of time offline or were to go hugely over budget or something like that then people may start to question whether it was the right way to go."

An interesting aspect of FLNG development is the competing design choices. One of the biggest differences in this regard is that Shell plans to load LNG tankers on a side-by-side basis to its Prelude FLNG while Exxon aims to load an LNG tanker from an offloading system mounted at the stern (behind) of its Scarborough FLNG.

Exxon is also pursuing a different liquefaction process for FLNG to the one used on the Shell facility and has been investigating potential alternative refrigerants for some time.

"Exxon will spend a huge amount of time in the background doing massive amounts of research and massive amounts of pre-engineering and consideration before they decide whether to go ahead with Scarborough," Norman said.

"The famed operators love to be different. I think it's good for the industry."

Paradoxically, he also viewed that industry collaboration is important too.

"One of the biggest messages from the FLNG work we did last year was around collaboration and that is still the message," Norman said.

"There are lot of companies, so many companies here in Perth, that simply do not want to collaborate or partner with another organisation.

"The rivalry needs to be tempered to the point where companies can sit down and work out a way that they can collaborate together and share knowledge so we can move forward as an industry rather than a situation where everyone is trying to get one up over everyone else."

He acknowledged that such collaboration was "easy to say but very hard to do" and believed the best examples were in Norway's oil scene although, having worked there himself, he knows that region too has companies with "won't collaborate with anyone else" mentalities.

"But we are a small city in a vast state with a small population that has to find ways to make the most with what we have got," he said of this need for Perth.

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