Global LNG and the Growth of Mid-Markets - A Catalyst for the Early Commercialisation of Floating Liquefaction Technologies

Verghese, Joe Thottungal (WorleyParsons)


Long range energy forecasts suggest that world demand for LNG would double by 2020. While much of this demand will be met by baseload LNG liquefaction plants, this growth trend is also leading to the evolution of new LNG market structures. This is evidenced by the emergence of mid-markets, principally regional markets which rely on smaller parcels of LNG than applicable to baseload plants, and exploit the opportunities offered by spot trades.

While onshore baseload projects (requiring long term Sale and Purchase Agreements) continue to be aggressively pursued, the emergence of mid-markets has generated interest in the monetisation of medium to smaller gas reserves. For offshore gas fields, the deployment of floating liquefaction units (LNG FPSOs) offers an interesting pathway to these emerging mid-markets.

A significant portion of the potentially exploitable gas reserves today is stranded gas. The pressure to bring these stranded reserves (estimated to be in the region of 4000 TCF) to the market is compelling. The LNG FPSO provides an attractive route to connecting smaller and medium size reserves to the emerging mid-markets. However, the initial deployment of LNG FPSOs is not without its challenges.
The paper overviews industry efforts at maturing LNG FPSO technologies to market ready status. It assesses the progress made on technology qualification for LNG liquefaction, LNG/LPG product containment and offloading systems. The need for functionality and reliability of these systems in the metocean environment (benign to severe) in the prospective development provinces has driven a sustained program of technology qualification by the proponents of the technology. The paper reports on the claims of these technology proprietors, and the industry's views of these claims.

The paper critically examines the concept and system critical issues relevant to LNG FPSO deployment, evaluates the principal technology and deployment risks, and explores avenues for the mitigation of these risks.

Concluding the above analysis, the paper assesses the potential of LNG-FPSOs to supply and stimulate the development of the mid-markets, and focuses, by way of example, on a notional opportunity in the Asia Pacific region.