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In Scarborough, Browse, Stockman, Majors see FLNG to cut costs

ExxonMobil, Woodside, Statoil ready to board on FLNG

2B1st_Project_Smart_Explorer_Sales_Pursuit_ToolEarlier this month, ExxonMobil and its partner BHP Billiton (BHP) unveiled  their project to introduce their first floating liquefied natural gas (FLNG) vessel as the remedy to stop the costs inflation of its Scarborough natural  project offshore Australia.

A week later, the Australian company Woodside Petroleum (Woodside) announced to stop its $50 billion onshore Dampier Peninsula LNG plant to investigate alternative solutions such as FLNG to develop Browse gas field.

On April 15th, 2013, the national oil and gas companies Statoil from Norway and Gazprom from Russia officialized their discussions to use FLNG for the shelved Shtokman arctic project.

Exxon_BHP_Scarborough-FLNG-gas-fieldAlthough very different, these projects have in common to face spiraling costs due to the accumulation of challenges to integrate them in sensitive or harsh environment far from any local infrastructures.

In these projects the distance from shore between 300 and 550 kilometers and the deep water constraints convert the pipelines solutions in nightmare and source of tension between the partners.

In addition the onshore LNG plants require the local acceptance and heavy ground accommodation work.

In this context, the FLNG appears as a marvelous solution even if it brings its own challenges that nobody so far has experienced.

So following Petronas with Sarawak, or Kanowit, FLNG and Shell with Prelude, ExxonMobil, Woodside and Statoil are ready to jump on board of these super giant vessels reaching 500 meters length.

ExxonMobil and BHP opte for Scarborough FLNG

For Scarborough, ExxonMobil and its partner BHP Billiton are now developing the world largest ever FLNG.

Discovered in 1979, Scarborough is estimated to hold 10 trillion cubic feet (tcf) of natural gas.

Located 300 kilometers from the shore in the Carnarvon Basin, the Scarborough FLNG should have a capacity of 6 to 7 million t/y of LNG

ExxonMobil_BHP_Scarborough_FLNGCompared with Petronas and Shell FLNGs currently in construction, Scarborough FLNG should require from ExxonMobil and BHP less capital expenditure per million t/y capacity as these costs are not proportional to the production capacity.

The first vessels to support LNG processes were over sized compared with their production capacity as to be the benchmark for further developments.

ExxonMobil and BHP intend to skip this first step of the the learning curve and benefit directly from the development of the full scale FLNG unit in shooting for – to 7 million t/y capacity.

Therefore Scarborough FLNG should not exceed $15 billion capital expenditure.

Through their 50/50 joint venture, ExxonMobil and BHP organized a competitive front end engineering and design (FEED) in order to make the final investment decision (FID) in following in 2014 and see their Scarborough FLNG in operation by 2020.

Woodside and Shell assess Browse FLNG solution

For Woodside, the option to consider the FLNG technology to develop Browse might be easier as it partners with Shell, holding 27% shares in the project, which appears today as the technology leader of this solution and which will have already Prelude FLNG running in the area.

Woodside_Shell_Browse_FLNGCurrently, Woodside is implementing the substitutes scenarios to replace the conventional scheme based on the onshore James Price Point that has been stopped when the costs for the development of Browse LNG were estimated to $50 billion capital expenditure.

From the first estimation the deployment of series of FLNGs would save $10 billion capital expenditure on the Browse LNG project.

In respect with the obligations for Woodside to submit its plan of development to the Australian Government, the decision for Browse FLNG should be made before mid of 2013.

Statoil proposes Gazprom Shtokman FLNG project

At the opposite side of the earth and far from the warm waters of the Timor Sea, Statoil and Gazprom are following a similar route to revive the shelved Shtokman project.

Located 550 kilometers from shore in the Barents Sea, the Arctic conditions and some strategic choices inflated the costs of the Shtokman project from initial $15 billion to more than the double.

Statoil_Gazprom_Shtokman_FLNGIn addition the glut of the shale gas in USA is threatening the gas market prices in Europe where should have been exported a share of the gas produced by Shtokman.

In front of these challenges, Statoil proposed Gazprom and FLNG solution that could give more freedom to export LNG eveywhere from West to East where the demand and the market prices are the highest.

Introducing a FLNG in such arctic region is a challenge in respect with all the risks associated to the ice accumulating on the decks and the threats of the icebergs.

But those risks were assessed during the FEED of Shtokman and solutions had been developed for the offshore units regardless if it should have been a floating production unit (FPO) or a conventional offshore platform.

With a long standing experience of the operations in arctic environment, Statoil considers that these solutions could apply in the same way for an Arctic FLNG.

While Petronas and Shell are leading the FLNG revolution with the support of engineering companies like Technip, Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering (DSME), the recent decisions made by ExxonMobil, Woodside and Statoil to consider FLNG to unlock costs-stalled projects are sending the signal to the oil and gas community that the FLNG technology is becoming a reality that shall count in all offshore gas field development projects from now. 

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