The evolution of FLNG concepts and costs
It's a difficult time for new LNG project developers. The industry is long on supply, demand growth is sluggish and prices are low. With a fair amount of spare LNG likely to be washing around the market over the next few years, buyers aren't exactly queuing up to sign contracts and support new projects.
And floating LNG hasn't been immune to these challenges. Although construction continues at the Prelude project in Australia and PETRONAS's PFLNG 1 project in Malaysia, several other projects are struggling to get off the ground.
In two bad weeks in late February and early March, PETRONAS suspended construction of its second FLNG vessel, the Browse project in Australia was shelved by its heavyweight cast of IOC project sponsors, and the Abadi project was converted to a land-based proposal at the direction of the Indonesian government. The much smaller and simpler barge-mounted Exmar DC LNG project in Western Canada was also cancelled at the start of the year due to a lack of potential customers.
So where are the remaining slate of projects focused? Mainly in west and east Africa. With Exmar's exit, Golar is securing its position as the leading provider of near-shore FLNG solutions. The company has built on the final investment decision (FID) achieved with Perenco in Cameroon last year and launched the ONE LNG JV with Schlumberger targeting stranded gas reserves. However, Golar's next most advanced project, Fortuna FLNG, in development in Equatorial Guinea with Ophir Energy, has struggled after Schlumberger pulled out of a proposed upstream farm-in. They're targeting a final investment decision at the end of the year and marketing agreements are in place, but the project needs to secure financing before it can progress.
Other major developments include ENI's Coral FLNG project in Mozambique. The project has substantially lowered estimated costs by operating a competitive FEED tender and scaling up capacity. This, along with successful marketing, (it sold its entire proposed capacity to BP) makes it the FLNG project we think is most likely to go ahead next.
Indeed it seems that Eni's success in launching Coral is encouraging KOSMOS to consider developing some of its vast resources in Mauritania and Senegal via FLNG too. Although nothing has been announced, an upstream subsea development piped back to a near-shore FLNG facility is believed to be under consideration. While not necessarily offering the same economies of scale as a land-based solution, it has the potential to offer early cash flow and could be simpler to market, which in today's subdued market could prove attractive.