* FLNG investments seen at $10 bln over next decade -analyst
* Players: Shell, Petrobras, Hoegh LNG, Flex LNG
* FLNG good for developing remote offshore gas fields -Shell
By Gwladys Fouche and Henrik Stoelen
OSLO, March 9 (Reuters) - Producing liquefied gas on vessels at sea could turn into a billion-dollar industry as engineers develop shipboard technology to help quench Asia’s thirst for energy, industry players said on Wednesday.
Floating production of liquefied natural gas (FLNG) is under development — with no projects currently operating — and could take off in the next decade if onshore LNG projects cannot meet rising gas demand.
The International Energy Agency (IEA) expects the use of gas to rise by 44 percent between 2008 to 2035, more than any other fossil fuel, with China expected to make up about a fifth of the global increase. [ID:nLDE6A815R]
The first FLNG project to come on stream may be Royal Dutch Shell’s (RDSa.L) Prelude scheme off Australia, which may begin producing gas in five to six years’ time, with Brazil’s Petrobras (PETR4.SA) also looking into FLNG. [ID:nL3E7D40JI]
“FLNG may represent some 10 billion dollars in investments over the next decade ... and may offer a return on investments of 20 billion dollars over time,” said Jarand Rystad, founder of a Norway-based research consultancy for the oil industry.
“There is very high gas demand over the long term, especially in Asia ... and they won’t be able to supply from local reserves,” he told Reuters on the margins of a gas seminar. Among the 160 gas fields where FLNG could be applicable worldwide in the next decade, Rystad said, some 10 percent could end up actually using the system. Oil majors like Shell could run the projects or commission firms such as Norway’s Hoegh LNG or Flex LNG (FLNG.OL) to do the job.
Most promising are gas reservoirs off Australia and Southeast Asia that are too far from land for easy transport to processing installations onshore. Additional markets include the waters off Canada, Brazil and Arctic Russia.
“In Australia there is a lot of gas that is further offshore, so an onshore development project concept is more challenging for those gas fields,” said Marjan van Loon, general manager for gas technology at Shell.
She told Reuters the firm’s interest in FLNG was not limited to Australia: “The whole Asia Pacific is interesting,” she said.
Behind Shell’s push for FLNG is the thirst of Asian countries for energy resources to fuel booming economies.
“What makes a project (like Prelude) tick are the economics,” said Van Loon. “With the Asian market, there is big demand for LNG and a lot of interest.”
There are many challenges ahead.
One is the oversupply of gas in today’s market, which the IEA expects to last until at least 2020. Low gas prices despite rising demand make investing in big, complex technologies like FLNG less attractive. [ID:nLDE6A815R]
“There are more than enough conventional LNG projects in the pipeline at the moment to cover the market’s needs,” said Paal Hansen-Tangen of oil research consultancy ODS-Petrodata.
“So the floating LNG projects have to be more economically viable than the traditional LNG projects to become a real market,” he told Reuters.
Nor is it easy to build a giant industrial installation on a floating vessel.
At Prelude, Shell will use a vessel some 500 metres long and roughly as wide as a football pitch that must resist the cyclones that often batter the region.
Another challenge is to limit the risk of fire and explosion on a cramped vessel loaded with highly explosive gas. Onshore, such risk can be limited by spreading installations over a wide area.
Shell says it is resolving these issues and remains upbeat on FLNG despite the hurdles.
“It is a tough road,” said Van Loon. “But we believe it will happen.”
Editing by Jason Neely