(Recasts, adds analyst comment, background)
LONDON Nov 1 Norwegian shipper Golar LNG
made big waves on Thursday by ordering its first
floating liquefied natural gas (LNG) plant, an innovation that
analysts said could loosen the grip on LNG production enjoyed by
The announcement set Golar's stock soaring as analysts
recommended shares in the Norwegian shipper, calling the move a
big game changer. Its share price rose more than 10 percent to
Golar agreed to convert one of its old LNG tankers into a
floating LNG vessel (FLNGV), or production plant, and is eyeing
African flared gas and pipeline systems as a source of supply,
Singapore's Keppel Shipyard will start drawing up
designs with vessel conversion due to start around mid-2013,
Golar said, in a deal analysts say may cost $600 million.
It will produce around 2 million tonnes of LNG annually.
Golar's billionaire chairman John Fredriksen said the
company retains the right to convert another two tankers.
Fredriksen said FLNGV will open new markets for LNG as well
as boost production capacity at a time of bottlenecks with
"massive opportunities for growth in the next five to 10 years."
"If successful, a massive value transfer from oil companies
to Golar LNG could emerge as the current LNG production cartel
could be broken," RS Platou Markets said in a client note.
"A successful FLNG conversion will be a big game changer for
GLNG as it can offer a full infrastructure solution between gas
markets," it added.
The global LNG market is controlled by a handful of state
and private companies, like Shell and BG Group,
as the high cost of developing plants has prohibited the entry
of independent players.
The move also underscores the growing attraction of LNG,
with demand due to grow rapidly over the next decade as
countries move away from coal-fired power plants towards cleaner
It also paves the way for Golar LNG to leapfrog rivals by
entering the upstream arm of the business long denied to
"This gives Golar the chance to enter the upstream segment,
for example, by partnering with companies to monetize gas in
west Africa that would otherwise be flared," Arctic Securities
analyst Erik Stavseth said.
Oil drillers produce gas as a byproduct which is often
flared, or burnt, on-site given its low value compared with
Stavseth said Golar's ability to liquefy and sell stranded
gas purchased at a discount will keep its shipments of LNG
comparatively cheap at a time of rising global demand.
Unlike Shell's Prelude floating LNG project, the
plant envisaged by Golar will be moored close to shore and
supplied largely by pipelines, not distant offshore gas fields.
"The floating solution gives customers increased
flexibility, quicker development times and the unique ability to
develop reserves that are currently uneconomic," Golar said in a
"It further gives them an opportunity to capitalize on the
large global gas spreads and the attractive economics associated
with gas as an energy resource," it added.
U.S. gas prices have bounced off 20-year lows to about $3 a
million British thermal units (mmBtu), compared with $9/mmBtu in
Europe and $13.50/mmBtu in Asia.
Golar's floating LNG plant will have maximum capacity of 2
The first conversion will be ready by the first-quarter
2015, it added.
(Reporting by Oleg Vukmanovic, editing by William Hardy)