For more than a decade the natural gas industry has been looking for a way to move LNG onto barges at sea in order to avoid the escalating costs of onshore plants. Royal Dutch Shell has just taken the first step to realising that goal by placing an order for the first ever floating LNG plant.
The vessel, called Prelude, will be the largest in the world, weighing six times more than the largest aircraft carrier, and measuring more in length than the Empire State building is in height. The huge ship will be built in Korea and then moved to the north-west coast of Australia, where it will provide a cheaper option to onshore LNG plants there. The project is expected to cost Shell around $13 billion, but that is far less than the $20 billion that it costs to typically build an onshore facility.
When they approved the project last year, Shell estimated that Prelude will produce about 3.6 million metric tons of LNG and 1.3 million tons of gas condensate a year, and cost about $3 - $3.5 billion per million tons of LNG produced. (RELATED: Oil Prices Dive 5% on Speculation and Mystery)
In comparison, Inpex Corp approved the construction of an onshore facility earlier this year, which will have a capacity of 8.4 million tons a year, cost $34 billion to build, and more than $4 billion per million tons of LNG produced.
Figures like this are causing Woodside, the Perth-based operator of the planned Browse LNG facility, to scrap their plans for the $44 billion plant and invest in a FLNG vessel instead.
Neil Gilmour, Shell’s FLNG (floating LNG) general manager, explained that the offshore plant is much cheaper than the onshore plant because they “remove the need for the pipeline and use about 50 percent of the raw materials for an equivalent onshore plant.” (RELATED: Oil Companies Race Back to the Gulf of Mexico)
According to Deutsche Banke AG, demand for LNG will more than double to about 460 million tons per year by 2025; and BP Plc suggest that FLNG will supply about three percent of that volume.
Other companies looking to follow Shell into the FLNG sector include; Petronas, ConocoPhillips, GDF Suez, and PTT Exploration & Production Plc.