stephen thompson, poten & partners: monetising & commercialising floating lng
DESCRIPTION
Stephen Thompson, Manager, LNG & Gas, Asia Pacific, Poten & Partners delivered this presentation at the 2013 FLNG Forum in Perth. The two day conference brings attendees key insights into the technology and concepts that will unlock Australia’s stranded gas reserves. This event brings together case studies, keynote and technical presentations from the experts at the forefront of the Floating LNG projects. For more information about the forum, please visit the event website: http://www.informa.com.au/flngforum2013TRANSCRIPT
MONTH 2008
© POTEN & PARTNERS 2008
CONFIDENTIAL
Monetizing and commercializing FLNG
Stephen Thompson
Poten & Partners
December 2013
MONTH 2009
© POTEN & PARTNERS 2009
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December 2013 Page 1
Two basic business models, one key idea
1. FLNG to access difficult, remote reserves
2. FLNG to emulate FSRU success
• But really a one “Janus-faced” value proposition
Janus, Roman god of
beginnings and transitions
External:
COST
Internal:
COMPETENCY
Past Future
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Other, experimental business models may surprise
• Caribbean FLRSU, which may be first
FLNG capacity on stream, already
breaks the mould (putting it mildly) • Small Canadian independent Pacific Rubiales
will obtain barge from Exmar under a BOO
contract
• EPCIC contract to Wison Offshore & Marine
Ltd and constructed in Nantong, China
• Non-propelled barge equipped to make
~500,000 tons of LNG per annum or regasify
up to 3.1 MMt/y
• Onboard tank capacity of 14,000m3, to be
offloaded either to permanently-moored FSU
or shuttle tankers
• Jetty-moored and supplied with gas by
pipeline from the onshore La Creciente field,
Colombia
• Black & Veatch has been contracted for
topside liquefaction equipment and packages,
on-site commissioning and startup services
Artist’s view of Caribbean LNG facility (at bottom)
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Difficult, remote reserves
• Sub-economical size
• Far from shore / supporting infrastructure
• But is this really driving decision-making?
Shell’s Prelude
FLNG and
INPEX’s Ichthys
onshore project
have virtually
the same
location
Bonaparte
FLNG will be
located
relatively close
to shore and
adjacent to
Ichthys pipeline
Bonaparte
source fields
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From Shell’s website
• Moving the production and processing out to sea where the gas is found is a major
innovation that brings huge new energy resources within reach. It also helps to avoid the
potential environmental impact of constructing and operating a plant on land, including
laying pipelines to shore and building other infrastructure.
• We are surging ahead with the world’s first floating liquefied natural gas facility, Prelude
FLNG, off Australia’s north-west coast. We expect Prelude FLNG to be the first of many
FLNG projects. This approach makes it possible to unlock new natural gas resources,
including smaller, remote fields as well as large fields supported by several facilities.
• There are also plans to use our FLNG technology and expertise elsewhere.
Prelude = Janus?
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If FSRUs are such a great idea, why not FLNG?
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FSRU advantages and players
• FSRU advantages vs. onshore terminal • Faster
• Small onshore footprint (permitting, NIMBY)
• Less site-specific engineering
• Allows outsourcing to specialized firms
• Lower capital outlay
• Greater predictability
Three firms dominate FSRU segment
Companies are also pursuing other (unspecified) opportunities
FLNG projects with FSRU "triumvirate" sponsorsProject MMt/y Owner
Lavaca Bay LNG Export 4.0 Excelerate
BC LNG 0.8 Golar?
PNG FLNG 3.0 Hoegh
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In case you didn’t believe me
From Excelerate’s webpage Unlike any other floating liquefaction design,
the Evolution FLSO provides an effective
solution at minimal cost. It significantly
reduces, or even eliminates, the need for a
civil footprint. Because it is built in the
controlled environment of a shipyard, the
FLSO can be brought to market faster and
more efficiently, contributing to a higher
degree of quality on a tighter schedule. The
design integrates proven and/or tested
technology, minimizing the need for fixed
infrastructure while reducing environmental
impact. It is able to accommodate a broad
range of gas-quality specifications. Equally
important is that it can be delivered in
approximately 44 months from final
investment decision to first LNG. The FLSO
is expected to open new markets around the
world, utilizing environmentally friendly
technology while creating greater economic
upside – another innovative solution that
echoes this basic philosophy and is in
keeping with the Excelerate Energy tradition.
From most recent Golar investor presentation
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Two business models refer to two broadly different
opportunity sets
Trekkies
• Larger reserves
• More difficult feedgas
• More challenging sites
• Bigger vessels
• More sophisticated
liquefaction technology
• Resource-holder driven
FSRU aficionados
• Smaller reserves/pipeline
• Easier feedgas
• Near-shore/dockside
• Smaller vessels
• Simpler liquefaction
technology
• Facility-provider driven
Disputed middle
Business models gravitate toward different resources
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Optimal size may be in the disputed middle
• Economies of scale should apply to liquefaction facilities on deck and ship hull, but may not
apply to structural elements supporting the topside facilities
• Higher liquefaction efficiency for larger FLNG unit, but more deck space required
• But huge variation between facilities is possible:
Facility size will be a compromise
Length Width Capacity
(meters) (meters) (MMt/y)
Scarborough 495 75 6-7
Prelude 488 74 3.6
P/S 99% 99% 55%
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Cost and competence
From Trunkline, Woodside’s in-house magazine Woodside has been at the vanguard of many significant
developments in the Australian oil and gas industry… and we
continue to seek innovation in a range of areas. So it’s quite fitting
that we find ourselves once again at the forefront as floating LNG
(FLNG) technology emerges as a potential “game changer” for the
industry. Steve Rogers, Woodside’s senior vice president Browse,
says FLNG is the next step in the evolution of hydrocarbon
production. “It has the potential to be a game changer in the oil and
gas industry,” Steve says. “We have the right people, plan and
resources in place… Th[e] development concept will use the same
FLNG technology pioneered by Shell and applied in the construction
of its Prelude FLNG facility which is set to become the world’s first
FLNG facility.
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But Janus may be hallucinating
• On cost + Eliminates pipeline
+ Eliminates separate offshore
processing
+ Much work done in controlled, lower-
cost environment of shipyard
• On competence • How relevant are existing skills, e.g., from FSRUs to FLNG?
• How long will it take, and how much will it cost, to develop the new innovations and capabilities needed to
successfully execute projects?
– Design
– Construction
– Operation
• How easily can these skills be migrated between projects?
• Will portable know-how remain with the first movers or leak out to followers?
− Additional cost for vessel movement
− Additional cost for tight design
− Potential performance
issues/downtime
− Maintenance and repair complications
− Higher operating expenses
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A range of future scenarios are viable
• Onshore plant marginal cost • Gorgon
• APLNG
• APLNG x 85%
• Offshore plant experience curves • High/None
• Medium/Small
• Low/Large
PENDING
Captures market from onshore,
pushes down industry marginal cost Flops
Competitive at margin after first few units
Niche play at best
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Other stakeholders have different drivers
• Floating LNG transfers some of
the economic benefit during
construction from the host
country, where the resources
are located, to the country
where the facility is built • Korea for Prelude and Sarawak
• China for Pacific Rubiales
• Not every one is happy with
this, e.g., • Timor Leste has vehemently
opposed development of Sunrise as
an FLNG project, insisting on a
greenfield plant on East Timor
• West Australian premier Colin
Barnett has threatened to block
development of Browse as an FLNG
project after onshore construction at
James Price Point fell through
Australian Maritime Workers Union protests FLNG WA parliament, June 2013
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Government industrial policy is ascendant
• Commercial lenders’ share of has dropped from almost three quarters since 2010 to less
than half, while ECAs have increased their share from a fifth to around half
• Shift toward ECAs is consistent with post-GFC damage to money-center banks, as well as
“national champion” style capitalism
• Financing for Caribbean FLRSU will come from IFC and China and US EXIM banks • IFC is lead and is also making an equity investment
Project finance disbursements to Oil & Gas sector
Project with both ECAs/DFAs and commercial banks
Source: Baker & McKenzie
ECA league tables
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Summary
• Two basic models • FLNG to access difficult, remote reserves
• FLNG to emulate FSRU success
Other, experimental models may surprise
• A “Janus-faced” value proposition • External: Cost
• Internal: Competency
• The two models have broadly different opportunity sets • Optimal size may be in the disputed middle
• Cost and competency advantages may be elusive • FLNG could turn out to be an industry champion, a flop, or somewhere in between
• If it succeeds, it is not clear that FLNG providers will make long-term economic profits
• A contest is brewing between resource-holder and facility-provider governments • Outcomes where both lose are possible
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LNG & NATURAL GAS CONSULTING CONTACTS:
AMERICAS
NEW YORK
Jim Briggs
Tel: +1 212 230 2000
EUROPE, MIDDLE EAST, AFRICA
LONDON
Graham Hartnell
Tel: +44 207 493 7272
ASIA PACIFIC
PERTH
Stephen Thompson
Tel: +61 8 6468 7942
AMERICAS
HOUSTON
Daryl Houghton
Tel: +1 917 225 7636