Giant gas rigs set platform for protests

Mon May 6, 2013 4:59pm EDT

* More floating gas plants set to be deployed on world's oceans

* Some plants six times the size of an aircraft carrier

* Oil firms, shipbuilders see costs savings and say technology sound

* Unions and state govts see threat to jobs and investment

By Rebekah Kebede

PERTH, May 7 (Reuters) - Grappling with soaring costs tied to constructing onshore gas plants, a growing number of energy firms are pledging tens of billions of dollars to build the world's biggest floating structures to exploit offshore gas fields.

By the end of the decade half a dozen or so floating gas processing plants, some weighing as much as six aircraft carriers and half-a-kilometre (0.3 miles) long, could be deployed on the world's oceans.

But what is being pushed by oil firms and ship builders as a blueprint that will transform the offshore gas sector and cut costs by up to a quarter is seen by critics as an untested and controversial technology that could hit jobs and investment.

The technology should enable gas to be got at in fields too far off land for pipes, allowing previously uneconomic reserves to be exploited, but there has been controversy over plans to use floating LNG platforms closer to shore instead of building a plant on land.

In Australia, where the first floating liquefied natural gas plant is due to launch by 2017, unions are fighting what they see as the risk of cheap foreign labour being used on a floating LNG platform in a remote area that could simply pull up anchor and go elsewhere once a gas field is depleted.

Royal Dutch Shell says that its $12.6 billion floating Prelude plant being built in South Korea to sit off Australia would mainly use local labour, denying media reports suggesting it would be "full" of low paid foreign workers.

"It's not. It's going to be full of Australians," Shell Australia country chair Ann Pickard told reporters in Perth, adding that 80 to 85 percent of jobs would be local jobs.

Unions say that local workers could not only lose out on construction work for onshore plants, but once in operation a floating plant could skirt local labour laws.

In a case that could shed light on how labour laws apply to rigs or floating platforms, a lawsuit has been filed on behalf of four Filipinos in a Western Australian court alleging they were paid the equivalent of about A$3 ($3.10) per hour while working on an offshore oil rig, less than a fifth of Australia's minimum wage of A$15.96.

The lawsuit centres on an argument over whether anchors or other lines attaching rigs and other floating production vessels to the seabed mean all workers should be subject to local labour laws.

JOBS FLOATING AWAY?

A series of floating LNG projects are underway or planned globally including a second involving Exxon Mobil and a third being considered by Woodside Petroleum, also in Australia.

Others are also planned off Indonesia and Colombia, and are being considered for Papua New Guinea, Israel and Mozambique.

The economic stakes are high. Woodside had said its plans for an onshore site for its Browse LNG project would have created about 8,000 construction jobs and created up to $50 billion in gross domestic product for Australia's economy.

Woodside CEO Peter Coleman said after a decision to shelve the onshore option and consider floating LNG that more long-term jobs would be generated by the latter than at an onshore plant.

But unions are sceptical over moves away from onshore processing.

"We must not allow local jobs to float away," said Australian Manufacturing Workers' Union State Secretary Steve McCartney.

East Timor's government also opposes plans by Woodside for another floating plant in the Timor Sea and is pressing for an onshore site that it says would bring more jobs and investment to the impoverished nation.

COST SAVINGS

Pressure to address the escalating costs of onshore plants has become a major issue in Australia, which aims to become the world's No. 1 LNG exporter by the end of the decade with $190 billion of projects underway.

Of seven LNG plants under construction, more than half have announced cost blowouts ranging from 15 to 40 percent. Companies blaming a high local dollar, expensive labour and tough environmental rules for the rise.

Analysts estimate floating LNG could shave 20 to 25 percent off LNG plant development costs, with savings coming primarily from the lack of a need for a pipeline to shore and less labour.

While labour makes up 30 to 35 percent of the cost of an onshore plant, it only makes up 20 to 25 percent of an offshore plant, according to Deutsche Bank.

More savings could come from whittling down the development time. Land-based LNG plants currently take a minimum of four to five years to construct, according to developer Exmar, while floating plants could take less than three years.

"This leads to earlier monetization of the gas field, which is highly attractive from an investment point of view," said Bart Lavent, managing director of Exmar's LNG Infrastructure division.

UNTRIED TECHNOLOGY?

Gas from floating plants in Australia will supply Asian nations such as China where demand is set to jump four-fold by 2035, according to International Energy Agency data.

"Asian companies are mostly looking at FLNG investment as a means of securing access to more LNG," said Oivin Iversen, Senior Vice President at Norwegian shipping company Hoegh FLNG, adding that the firm expected to have orders within two years for small-scale to mid-size floating LNG vessels.

Western Australia's Premier Colin Barnett, who has opposed floating LNG due to the threat to jobs and investment, said the technology was untested and could be at risk from cyclones.

Shipbuilders, however, are licking their lips at the prospect of fat contracts. South Korea's largest - Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries and Samsung Heavy Industries - are all involved in building LNG platforms.

"I personally think the time has passed for worries about whether floating LNG is untested," said an official at Daewoo Shipbuilding, adding that the components had been tested and the technology was backed by leading energy firms.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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