You are on page 1of 10

OTC 23669

Delivering Offshore Gas to Regional Mid-Markets - Assessing the


Comparative Merits of Floating LNG and CNG Transport Routes
Joe T. Verghese, WorleyParsons
Copyright 2012, Offshore Technology Conference
This paper was prepared for presentation at the Offshore Technology Conference held in Houston, Texas, USA, 30 April3 May 2012.
This paper was selected for presentation by an OTC program committee following review of information contained in an abstract submitted by the author(s). Contents of the paper have not been
reviewed by the Offshore Technology Conference and are subject to correction by the author(s). The material does not necessarily reflect any position of the Offshore Technology Conference, its
officers, or members. Electronic reproduction, distribution, or storage of any part of this paper without the written consent of the Offshore Technology Conference is prohibited. Permission to
reproduce in print is restricted to an abstract of not more than 300 words; illustrations may not be copied. The abstract must contain conspicuous acknowledgment of OTC copyright.

Abstract
The emergence and near exponential growth of regional gas markets has been driven by a number of factors, including a
decisive shift of the power sector to natural gas fired power stations, the burgeoning demand for gas at city gates, and switch
of industrial consumers to natural gas from other fossil fuels.
While onshore baseload projects continue to be aggressively pursued for supplying the larger established markets, the
emergence of gas and LNG regional mid-markets has stimulated interest in technology solutions directed at the monetization
of medium to smaller gas reserves. A significant portion of the potentially exploitable gas reserves today fall into this midtier category. The pressure to bring these mid-tier reserves (estimated to be in the excess of 2,000 Tcf) to the market is
compelling.
For offshore mid-tier gas fields, the deployment of floating liquefaction units (FLNG) offers an interesting pathway to
emerging mid-markets and currently is the subject of much industry focus. Floating CNG (FCNG), prominent in the spotlight
in the early 2000s is now re-emerging as a viable gas transportation concept and is offered as an alternative to FLNG for the
delivery of gas from mid-tier gas reserves to regional markets. FCNG, for example, offers a dramatic reduction in
terminalling costs compared with FLNG.
The paper outlines the opportunity domains for application of above technologies (reserve volumes, gas quality, distance
to market etc.) and respective readiness for market. It compares and contrasts these competing technologies, assesses their
merits in meeting value chain objectives, and evaluates them from a standpoint of scalability and flexibility for redeployment.
The paper also reports on the current application status of the technologies, the claims of the respective technology
proprietors, and the industrys views of these claims.
Concluding the above analysis, the paper focuses, by way of example, on a notional opportunity to demonstrate the
competing economic and commercial merits of these alternative approaches to monetization of mid-tier reserves.
Introduction
The remarkable growth in gas demand over the past decade has led to the development and installation of a significant
number of LNG baseload plants. These baseload projects have focused on the exploitation of relatively large gas reserves,
typically 5 Tcf+. These baseload projects are often underpinned by long term Sale and Purchase Agreements which were
necessary to secure project financing and guarantee the off-take of LNG product. However, gas markets are now witnessing a
structural change, with the emergence of mid-markets i.e. regional markets which typically are an aggregate of relatively
small gas and LNG trades. Typical of this are LNG supply parcels delivered from coastal storage terminals or small onshore
LNG liquefaction plants, and often distributed by road tankers and vacuum jacketed containers to cities and towns in the
hinterland. The emergence of these mid-markets has generated interest in the monetization of medium to smaller gas
reserves.
A significant portion of the potentially exploitable gas reserves today is offshore stranded gas. Developers and operators
have been looking at opportunities to bring these stranded reserves profitably to markets.
Emergence of Mid-markets
The development of gas mid-markets has been stimulated by the growth in demand in several regions, but notably in Asia
Pacific. GdF Suez estimates Asian demand growth to be +5%/year in the 2010-2020 period(1). This gas demand is driven by
growth in power generation (driven by rapid industrialization and in part by deregulation) and also by the prolific demand in

OTC 23669

the industrial sector. Low gas prices relative to diesel or gasoline has also prompted the switch to LNG and gas. LNG
demand for domestic trade is reported to be growing by 38%. In China alone, there are estimated to be 1,200-1,500 LNG
tanker trucks serving the domestic trade. There is also a growth in tanker rail cars and short haul marine vessels. In addition
to the factors mentioned above, other key drivers for the growth of these mid-markets include the following:
The persistence and growth of short term LNG trades (the spot market) thus enabling entrepreneurs and promoters to
gain market entry.
The emergence of more flexible contract structures, with producers keen to take advantage of new opportunity
markets.
The rapid development of regasification terminal infra-structure, leading to greater access to LNG imports,
encouraging greater access to short term trades.
The de-regulation of the power sector, as already mentioned, leading to a greater participation in the power sector by
independent power producers.
This growth in mid-markets opens up a decisive opportunity for operators with mid tier assets whether onshore and
offshore. The monetization of small to mid-scale stranded gas (where reserve volumes are 0.5 to 3 Tcf) is therefore receiving
increasing attention (see Fig. 1). Connecting these small to medium size reserves to the burgeoning gas mid-markets is
emerging as an attractive business model among regional entrepreneurs and promoters. Exploitation of these new market
opportunities by the onshore sector is already under way. China has seen the development of a number of mid-scale LNG
plants (25,000 mta to 400,000 mta) distributed across the country, and reflecting the relative immaturity of gas trunkline
network. At Sulawesi in Indonesia, Energy World had planned a four-train LNG plant (using Chart technology) of 0.5 mta
per train in response to the opportunity in the growing mid-markets in the region.
This paper posits that the evolution of the mid-markets will catalyze the development of floating solutions such as FLNG
and FCNG. The greater contractual flexibility offered by mid-markets provides an opportunity for Operators and other
developers to exploit these transport routes to monetize the many stranded gas reserves hitherto dormant in their portfolios.

Figure 1 Mid-Scale LNG Target Reserves

Figure 2 Stranded Gas Reserves and Regional Markets

This has already spawned the development of small and mid-scale LNG onshore liquefaction plants in locations such as
China. The industry is now evaluating the potential of floating liquefaction units (LNG FPSOs) and also floating CNG
(FCNG) as candidates for monetization of offshore gas reserves.
Availability of Mid-Tier Gas Reserves
According to Infield research, there are several hundred mid-tier gas fields that are suitable for modular mid-scale LNG
plants. Several of these fields are offshore. Fig. 2 shows the distribution of some of these offshore fields, and potential
markets they can service through the deployment of floating liquefaction units and FCNG. Stranded gas resources can target
both regional markets and international markets. Connecting these resources to market will depend on a number of factors
including technologies used, distance to markets, gas volumes, gas delivery economics etc.
The Floating LNG Route
Fig. 3 illustrates the deployment of the LNG FPSO which receives its feed gas from subsea wells in the non-associated gas
field. Flowlines connect the subsea wells to the FPSO, with risers conveying the gas through a swivel located in an external

OTC 23669

turret. LNG, and any product LPG stripped out from the gas feedstock, is stored and periodically shipped by trade carriers to
destination markets.

Figure 3 FLNG Development Architecture

Figure 4 FPSO Topsides Processing Concept

Fig. 4 is a block flow diagram of the topsides processing concept which includes two sections, the Feed Gas Preparation
and Treating, followed by the LNG Liquefaction. The extraction of LPG and condensate is to a greater and lesser extent
integrated with the pre-cooling steps associated with liquefaction step, depending on the generic configuration of the process.
The tighter the integration, the more efficient is the LNG scheme.
The principal facilities on the FPSO include:
Inlet Gas Reception Facilities
Acid Gas Removal Unit
Gas Dehydration
Mercury Removal Unit
Gas Conditioning Unit
Gas Liquefaction Unit
LPG/Condensate Stabilization Unit
Product Storage & Offloading
Utility Systems
Safety Systems
The topsides systems are located typically on a process deck approximately 3.5 meters above the main deck. The storage
tanks for LNG, LPG and Condensate are located below main deck. The Living Quarters are located close to the bow of the
FPSO upwind of the hazardous areas, flare etc.
In response to global markets and mid-markets, two production capacity bands are already evident in the consideration of
the first generation of prospective LNG FPSOs.
On the one hand, Shell and Petrobras are evaluating the potential application of LNG FPSOs for capacities of 3 million
tpa+ which are close to baseload plant train capacities, and are consistent with the exploitation of gas reserves of 4-5 Tcf and
greater. In contrast, companies such as FLEX and Hoegh are offering capacities in the 2 million tpa and sub 2 Mtpa capacity
domain, principally targeted at the exploitation of gas reserves of 0.5 to 3 Tcf, more characteristic of the mid-tier stranded gas
reserves.
The expanding gas mid-markets are proving to be a magnet for the consideration of floating CNG, especially in the
context of supply to regional markets. From Fig. 5 it can be seen that the niche for CNG are shipping distances of under
2,000km.
The CNG Transport Route
CNG vessels provide an alternative for transporting potentially stranded natural gas from production sites to market.
Marine CNG technology, as offered by one technology proponent Sea NG (4,5) compresses natural gas to pressures of
4,000 psi to reduce its volume by about 300 times for transportation in dedicated vessels. While liquefying natural gas results
in a higher reduction in gas volume (around 600 times), LNG liquefaction equipment, vessels, and regasification facilities
aggregatively result in higher capital expenditures than CNG projects. CNG projects can be economical over shorter

OTC 23669

distances (e.g. up to 2,000 kms, see Fig. 5)(7). As transport distances increase, the investment required in CNG transport
vessels increases. Floating LNG and associated value chain tends to be economically attractive over longer distances to
market. However, for distances encompassed by regional markets, both routes are candidates and the choice of one or the
other has to be determined on a case specific basis, and dependent on production volumes, gas quality, reliability of supplies
and distance to markets.
CNG vessels can be used to serve multiple sites, including smaller, marginal fields otherwise not economical to produce.
CNG vessels can also be redeployed at the end of a fields production life. The scalability of CNG system and the
opportunity to reuse the ships makes the concept more attractive.
Ever since its inception in the 1960s, there have been several attempts to develop an economically viable seaborne CNG
concept. The prohibitively high cost of the pressure containers deployed on the carrier ship has been the principal hurdle to
the commerciality of the concept.
CNG proponents have been working on a number of different approaches. Much of the development effort in early 2000
was triggered by the discovery of substantial amounts of gas, both stranded and associated in the Grand Banks basin offshore
New Foundland. The proximity of these discoveries to the New England and New York markets made the proposition of a
CNG solution a particularly compelling one.
Cran and Stenning of Calgary (now Sea NG) offered a unique type of pressure containment called the Coselle. Enersea
Transport of Houston offered the Volume Optimized Transport and Storage (VOTRANS), and TransCanada Pipelines
focused their development efforts on GTM(2). GTMs are composite reinforced pressure vessels using high strength low alloy
steel reinforced with high performance composite. It may be noted that the principal objective of these quite different
development directions was broadly similar, i.e. to achieve a higher ratio of gas containment relative to the weight of pressure
vessel either through utilization of higher yield strength steels, use of non-metallic components or through achieving greater
gas mass storage at lower pressure through partially refrigerating the gas cargo.

Gas Field

Gas Feed Stock

FCNG

e Grid

CNG PRODUCTION AND LOADING

Pipelin

CNG PRODUCTION AND SUPPLY CHAIN

CNG TRADE CARRIER

CNG TRADE CARRIER

Onshore
Compression

SUBSEA WELLS

CNG UNLOADING AND EXPORT

Figure 5 Energy Transport Distance Envelopes

Figure 6 Offshore CNG Development Architecture

Irrespective of the technology eventually selected, there are several key elements required to satisfy the CNG value chain.
Gas production from the offshore gas field (e.g. subsea) or delivery of associated gas to the floating CNG unit (the
FCNG).
Processing the gas prior to compression to the required CNG pressure.
Gas Compression (for storage in the FCNG unit or for loading the CNG carrier).
Export of CNG to the CNG carrier(s).
Sail-out of CNG to the offshore buoy or jetty facility serving the onshore gas grid.
Discharge of the CNG cargo down to the heel inventory in the CNG carrier using a scavenger compressor or
displacer liquid.
Fig. 6 shows the typical architecture for a CNG system. Note the FCNG vessel can optionally include CNG storage
modules in which case the production from the gas field or source can be continuous i.e. the storage modules serve as buffer
storage which can receive production from the field when the loaded CNG carrier is disconnecting and prior to connecting up

OTC 23669

the next carrier to the FCNG vessel. Storage provision on the FCNG vessel also means that the loading of the CNG carrier
can take place at an accelerated rate. The effective loading rate will be the sum of gas withdrawal rate from the buffer tanks +
the gas production rate from the field, thus leading to a faster turnaround time for the CNG carrier.
Comparative Assessment
The above discussion has highlighted the suitability of both floating CNG and floating LNG routes for the monetization of
mid-tier gas reserves. In this section (Table 1), a qualitative assessment is made of the merits and drawbacks of these
alternative approaches, from the standpoint of overall value chain from production wells to the onshore export pipeline grid.
Table 1 Comparative Assessment of FCNG and FLNG for Application to Mid-Tier Reserves Production
CRITERIA
TECHNICAL

Volatility in Feed Gas


Rates (from subsea wells
or associated gas supply)
Complexity of feed gas
pre-treatment

Hydrocarbon liquids
removal

Product preparation for


storage and export

System start-up and


shutdown and transient
operations
Overall Fuel Gas
Consumption

Gas Delivery to Grid

FCNG

FLNG

More resilient in view of relative simplicity of


topsides processing

The pre-treatment and liquefaction steps require more


stable flowrates

Minimal processing requirements, with gas


dehydration as the principal processing step to
obviate hydrate formation and corrosion. Other
contaminants need only be treated to the extent
demanded by the export pipeline specification.
Required to the dewpoint requirements of the
pipeline gas. Any liquids generation needs to be
accommodated in FCNG unit, and arrangements
are required to ship out these liquids which detract
from the simplicity of the CNG concept
Requires only gas compression to the required
storage pressure (Sea NG concept) or gas
compression with low level refrigeration (for the
(8)
Enersea Concept)

Rigorous pre-treatment required to condition gas for


liquefaction, including removal of CO2 to 50 ppm, Hg
removal and water removal down to 1 ppm (requiring the
application of mol sieves).

Resilient to these changes given the simplicity of the


topsides system configuration. Important
consideration for the smaller stranded gas fields
Under 5% of the gas feed rate for compression and
fuel use for the FCNG, although these requirements
rise with the number of CNG carriers deployed
(based on gas volumes and distance of gas
delivery).
Requires unloading buoy or jetty, and onshore
compression for gas evacuation from CNG trade
carrier and export into pipeline

NGLs need to be fractionated out to meet typical limits on


Butane content. The additional fractionation requirements
increase the cost and weight of topsides. Clearly, the
additional liquids revenue leverages the economics of the
FLNG scheme.
Requires deep refrigeration scheme for liquefaction of the
gas at -162C. Complexity in design, equipment
selection, metallurgy and ultimately in operations.
Significant considerations are marinization of such
equipment, designing for performance of equipment
subjected to motion. These factors can contribute to the
capital cost of the topsides.
The more complex pre-treatment and liquefaction circuits
require stable gas flowrates and are less amenable to
quick start-ups and shutdowns
Typically 8-10% of feed gas rate

Requires unloading buoy or jetty, and also LNG storage


and regasification facility. In addition to offshore
liquefaction, this is the other significant cost element of
the LNG value chain.

SAFETY AND RISK


Intrinsic Safety

Significant gas inventories in the hold of the FCNG


unit and CNG carriers at 275 bar is a focus of Hazid
and Hazop reviews. Classification societies have
evaluated these issues, and design of containment
systems and their integrity, before granting Approval
in Principle

Product transfer and


loading operations

Offloading operations from FCNG to the CNG trade


carriers are expected to be achieved using tandem
offloading or buoy loading systems using high
pressure hoses. Good precedents exist for high
pressure gas transfer through swivels housed in
turrets. Minimal experience with tandem offloading
of high pressure gas.

The intrinsic safety of seaborne LNG has been


demonstrated through extensive marine operations.
FLNG systems have also been reviewed by Classification
Societies and granted Approval in Principle. A principal
hazard is the presence and storage of LPG, and mixed
refrigerants (if mixed refrigerant liquefaction cycles are
selected).
Cryogenic hoses as required for tandem offloading of
LNG are still under development.
In more benign sea states, Side to Side loading by
conventional mechanical loading arms is accepted as a
viable LNG transfer mechanism.

OTC 23669

COMMERCIAL
Capital Outlay

FCNG unit cost itself is typically 50% or less than for


FLNG, but a fleet of CNG carriers required to
complete the CNG value chain needs to be
chartered. The cost of this fleet needs to be
amortized, and especially for the early CNG projects
the ship operator will require to be incentivized.

Distance to Market

Distance to market is a key determinant of the


number of CNG carriers required for a given
deliverability. This drives the economics of the CNG
project. Although economics is case specific, it is
anticipated that for the distances that typify access
to regional markets, CNG will be competitive with
FLNG schemes.

Scalability

A CNG project can begin with modest volumes with


a few ships and scale up to meet growing demand
by deploying additional ships

FLNG requires the high initial capital investment


regardless of the distance to market. However, because
the LNG shipping business is mature, vessel charter can
be arranged at prevailing market shipping rates. For midtier gas reserves supplying the regional market, this is a
significant advantage, in that it allows a great deal of
flexibility in particular for spot trades.
LNG is a competitive alternative at distances
approaching 2,000 km and beyond.
The availability of the LNG spot market and the sheer
volume of global LNG trades provide the FLNG option
with a great deal of market flexibility and potential for
cargo diversion to more distant markets in the short term.
Capacity of the FLNG unit needs to be determined on the
best initial assessment of gas deliverability as there is
limited potential for scale-up.

Technology Maturity and Risk


Following the assessment of the relative merits and drawbacks of the respective schemes, it is instructive to review the status
of maturity of the technology and readiness for application status. The author is aware of at least three substantial FEEDs that
have been executed for FLNG, and these include:
Shell Prelude LNG FPSO
Petrobras LNG FPSO for the Tupi (now Lula field)
Flex LNG for Interoils Papua New Guineas Elk Antelope fields
The above FEEDs all appear to have demonstrated that there are no showstoppers from a technology standpoint for the
first field application of an FLNG unit. Nevertheless, it is true to say that these evaluations have all been performed with
respect to the specific metocean environments where the deployments were to take place. There are technology assessments
that need to be considered with respect to evaluation of fluids, and the impact of severity of the metocean environment. The
liquefaction technology selection is also crucial in the consideration of the FLNG project. Optimal technology choices are
key to achieving high availability of the LNG FPSO system. The technology risks associated with the FLNG project are
reviewed below, prior to similarly chronicling the risks for FCNG.
LNG Off-loading Technology and Status of Maturity
A critical feature of an FPSO based offshore LNG scheme is the off-loading of LNG from the storage tanks in the FPSO to
the trade carrier. This arises from both the independent and the coupled motion characteristics of the two vessels moored in
close proximity. Several factors impinge on the choice of technology for this operation:
Maintenance of minimum safety separation required for the two vessels, for avoidance of collision.
The integrity of the LNG transfer using loading arm or cryogenic hoses.
The reliability of the overall system of mooring and fluid transfer, to ensure impact of downtime in such operations
is minimized.
Cost and mechanical/structural complexity.
Technology qualification status.
Extent of modifications required to trade carriers.
Depending on the sea-state prevalent in the province where the FPSO is deployed, two alternative mooring positions may
be applied:
Side-by-side
Tandem
The side-by-side solution replicates the arrangement seen at the shore terminals, and is applied in benign to semi-benign
metocean environments. But the tandem off-loading arrangement is considered more appropriate for severe sea-states.
Technology proprietors (see Table 3) claim that tandem off-loading can operate in sea-states with Hs = 5.5m.
Tandem ship to ship LNG off-loading has not been performed to date, but several technologies are in an advanced stage
in their development. Developments in off-loading technology have pursued two distinct paths:

OTC 23669

Adaptation of the LNG off-loading loading arm concepts, widely proven in the context of shore-side LNG offloading.
Development of the cryogenic loading hose, either in an aerial configuration or a free floating configuration.

In general, the motion characteristics generated by two vessels in a coupled configuration requires complex analysis to
ensure the integrity of fluid transfer using loading arms (especially in severe sea states). The development of the cryogenic
hose concept has made progress with advanced testing of the hose currently in progress with several technology developers.
The medium term goal is to achieve the deployment of a floating cryogenic hose concept. The latter will (a) materially
simplify the off-loading concept and (b) will minimize the motion inter-action between two vessels. This development has to
be viewed in the context of a multi-year development horizon to attain market ready status.
Table 2 Comparison of LNG Offloading Systems
Type
Loading Arm (FMC)

Feature
Proven Design

Availability
High

Using conventional Facilities


ALLS (Technip)

Under Development

Cost
1

Remark
STS

(BASE circa 20mUSD)


High

1.3

STS

Low

N/A

Tandem

High

Expected to be high

Tandem

Low

N/A

STS

Low

Low

STS

Expected to be high

Expected to be high

Tandem

Expected to be high

N/A

Tandem

Test & Cert. Completed


Floating Hose (Technip)

Under Development
High BOG rate

ATOL (FMC)

Under Development & Testing


Bow loading required

Composite Hose
(Bluewater)

Under Development

Gutteling Hose

Under Development

Limited Operational Condition

Limited Operational Condition


SYMO (SBM)

Under Development
Bow loading required

OCL Group

Under Development

OTC 23669

(3)

LNG Containment Systems and Risks


Of the various systems classified by the IMO, only the Moss spherical tanks and IHI prismatic, Type B tanks, and the Gaz
Transport & Technigaz (GTT) membrane tanks are proven in service. These are illustrated in Fig. 7.

Figure 7 Propriertary LNG Tank Configuration

The membrane type containment also suffers from a further disadvantage. This arises from propensity of tanks to induce
product sloshing due to vessel motions. As the LNG storage will be progressively filling with product, it will often have slack
tanks. The inventory in these partially filled tanks is vulnerable to sloshing. Sloshing can generate high dynamic loads and
impact pressures, which can impair the containment system, the hull and the pump tower in the tank.
The IHI SPB tanks are inherently superior to the membrane type tanks with respect to sloshing of the LNG in partially
filled tanks. Sloshing is a concern specific to LNG storage in an FPSO, where the storage tanks will see varying levels of fill,
unlike trade carriers which sail with either a full or empty cargo.
GTT, proprietors of the membrane containment technology, have now developed a design that addresses the sloshing
issue by adopting a twin row arrangement. The twin row arrangement (two rows of independent tanks) provides additional
support for heavy topsides, in addition to overcoming the sloshing issue.
CNG Technology Status and Risks
Although pressure vessels have been in use for several decades to store CNG in motor vehicles, their adaptation to marine
transport has proven to be more challenging because of the volume of CNG needed to be contained on the ship. Technology
proprietors have risen to this challenge by proposing innovative concepts such as the Coselle by Sea NG. The Coselle is a
coiled pipeline made from relatively inexpensive, small diameter ERW pipe. The coiled pipe assembly can then be integrated
into and fits compactly into a ship. The Coselle has been tested and fully approved by ABS, including its integration into the
Coselle ship. The Coselle concept significantly reduces the valves, fittings and control systems required relative to the
pressure vessel concept.
The coiled pipe technology is not new as it has been widely used for laying subsea pipelines. However, that said, the
Coselle will still need to address the challenge of moving from prototype to commercial production mode on this type of unit.
Similar comments apply to the gas containment systems of the other technology proprietors.
CNG transfer from FCNG vessel to the CNG carrier in a tandem mode will require motion studies of this coupled
configuration to determine the envelope of operating conditions that the high pressure transfer hose must be specified for.
Although gas injection risers on oil FPSOs are designed for similar internal pressures to that of CNG transfer, the coupled
configuration can result in motion behavior that imposes unacceptable loads on the transfer system.
There has always been a public perception issue with the marine transport of CNG(6). This concern has two dimensions.
The first is concern with high pressure gas containing vessels moving into port areas or inshore. The second has to do with
the expected frequency of transits by CNG carriers to unload cargo (as required to maintain continuity of gas supplies to the
pipeline grid), and its impact on local inshore marine environment.

OTC 23669

Both the above concerns can be alleviated by the choice of an unloading buoy located some distance offshore or through
the mechanism of submerged turret loading (STL) now widely used for crude oil and LNG transfers. The gas could then be
transported to the onshore compression station and onshore pipeline grid through a relatively short length of submarine line.
The Commercial Case- Delivery to Regional Markets
A. CNG Case
Sea NG, in a recent paper presented in London(5), has outlined some key cost expectations for their system.
The following cost estimates were noted:
1. CNG Ship (Carrier Cost) Version C84 with a capacity of 350 MMscf: US$ 211 millions
2. FCNG Cost, consisting of:
Capex
USD, millions
C84 Base Ship:
211
Turret and STL:
70
Tandem Offloading:
15
Compression Cost:
175 (about 50,000 hp assuming 800 psi suction and 25% spare)
Processing Cost
150
Total
621
3.

For a notional example of production rate of 350 MMscf/D, and distance to market of 1,000 kms, CNG option costs
are as follows:
FCNG Vessel+processing+tandem loading+mooring: $621 millions
5 CNG trade carriers:
5 X $211 =$1,055 millions
Total capital cost:
$1,676 millions
The costs of decompression facilities for CNG onshore will be additional though expected to be lower than the cost of
regasification for the LNG case described below.
B. FLNG Case
Industry figures suggest a range of costs from $700 to over $1,000 per tpa LNG capacity.
350 MMscf/D gas feed rate will produce approximately 2.3 million tpa of LNG. On this basis, the outlay on the FLNG
vessel and topsides is expected to be in excess of $1,600 millions. LNG shipment costs by conventional trade carriers will be
additional, as indeed the apportioned cost for the regasification terminal required for gas export to the regional grids.
Some pathfinding economics are presented below based on above investment parameters, to illustrate the anticipated Cost
of Service for the FLNG value chain.
The shipping distance to the markets is assumed to be 1,000 kms.
The following additional assumptions have been made in support of the economics:
Notional FEED Gas Composition
Component

Mol %

Methane

86.8

Ethane

6.91

Propane

3.87

i-Butane

0.40

n-Butane

0.67

Pentanes+

0.55

CO2

0.71

N2

0.08

H2 O

0.01

Total

100

Feed Gas nominally priced at $2/Mscf


No credit taken for revenues generated by NGLs (for comparability)
LNG FPSO Production Life: 20 years
Corporation Tax: 38%
Regasification tariff : $1 per MMBTU
Internal Rate of Return (IRR): 12%

10

OTC 23669

Indicative economics carried out by the author derive the Cost of Service for LNG delivered and regasified into regional
pipeline is $6.9 per MMBTU (based on the feed gas rate, pricing, and FLNG parameters defined for the case above).
Comparable pathfinding economics (on similar financial assumptions) for the CNG route indicate a Cost of Service of
circa $5.5 for the selected distance to markets. Note that the economics for CNG are predicated on the capital outlay figures
extracted from the paper by Sea NG(5).
Conclusions
The emergence of mid-markets heralds an important opportunity for the monetization of small-scale and mid-scale gas assets
in the 0.5 to 3 Tcf range, using offshore liquefaction facilities such as LNG FPSO.
The growth of the mid-markets has been stimulated by growth in gas demand in several regions but notably in Asia
Pacific. This impressive escalation in demand has been driven by several factors, including the growth in power generation,
town gas consumption, and the demand from the industrial sector.
This demand growth has opened up a decisive opportunity for operators with mid-tier assets offshore. Entrepreneurs and
promoters are now engaged in assembling the value chain that will connect stranded gas to these emerging mid-markets.
The paper has demonstrated the potential of FLNG and FCNG to play key roles in the monetization of stranded gas via
this pathway to LNG mid-markets.
The paper has compared and contrasted these alternative approaches, and analyzed the merits and drawbacks of each
scheme. Thereafter the technology status of the two schemes has been assessed. This assessment shows that there are no
showstoppers in implementing either type of project. However, there are technology challenges to be addressed in moving
to application status. For LNG transfer in severe metocean conditions, the development of cryogenic hoses or advanced
concepts in loading arms are in final development/testing and qualification phases.
A notional case study with pathfinding economics suggests that for distance to regional market of 1,000 km, the FCNG
scheme has a Cost of Service lower than for FLNG. However, as distance to markets increase, FLNG cost trends become
more favorable. FLNG also offers greater flexibility in diverting product to international markets and to spot markets, and
this flexibility can be an important determinant of final choice of scheme.
Nomenclature
FLNG=Floating Liquefied Natural Gas
FCNG=Floating Compressed Natural Gas
FPSO=Floating Production Storage and Offloading
Hs=Significant Wave Height
LPG=Liquefied Petroleum Gas
Mta = million tonnes per annum
References
1

Bower, A. (GdF Suez). 2010. Dynamics of LNG Markets. 5th Asia LNG Summit, October 2010.
Bybee, K, (JPT), Marine Transportation of Compressed Natural Gas. JPT Online. September 2003.
3
Sparling S., Threet D.,Teti N.,(Sutherland Asbill and Brennan LLP). 2009. Marine CNG opens alternate production, delivery options. Oil
and Gas Journal, Volume 107, Issue 8, 2009.
4
Stenning D., Fitzpatrick J., Trebble Dr M., (Sea NG). 2011. A Simpler Way?. LNG Industry, Autumn 2011.
5
Stenning D.,(Sea NG). 2011. Floating CNG A simpler, less expensive way to produce offshore stranded gas. London, 15 June 2011.
6
Verghese J.T. (WorleyParsons). 2011. Global LNG and the Growth of Mid-Markets - A catalyst for the early commercialisation of
Floating Liquefaction Technologies, OTC May 2011, OTC 21285.
7
Wang, Dr X.(Sea NG). 2011. Marine CNG Trade: The Time has come. The LNG Review 2011.
8
White C.,et al (EnerSea Transport), Ha J.K. (Hyundai),Naokawa S. (K Line), McClure S. (Alan C. McClure Associates, Inc.). 2003. The
Impact of Compressed Natural Gas Shipping upon Offshore Gas Development. OTC 2003, OTC 15070.
2