Publications

Large remote deepwater gas discoveries have unique challenges with regard to becoming commercial projects. Two options are floating Liquefied Natural Gas (FLNG) and floating ",Gas to Liquids", (FGTL). These technologies include several subsets that have specific advantages and disadvantages depending on a range of investment decision inputs which will determine which option is appropriate for a particular development. Input to these decisions will include governmental or regulatory requirements, gas reservoir characteristics, facility issues, product pricing, location of market(s), and risk. Government or regulatory requirements include taxation, cost recovery, domestic market obligations, and procurement rules (including local content). Gas reservoir characteristics include reserves, production profiles, presence of oil/condensate, and gas composition (methane C1, ethane C2, propane C3, butane C4, C5+, water, mercury, H2S, CO2, etc.). Facility issues range from technical to commercial/contractual. Technical facility issues include the number or size of floating facilities required for production, storage, offloading, and transport, processing risks (reliability or safety), metocean constraints, project schedules, constructability (including newbuild or conversion), and operability. Commercial/contractual facility issues include capitalrequirements and timing, purchase or lease, depreciation, cost recovery. Product pricing issues include selecting the market(s), determining pricingmechanisms/formulas (floors, caps, ties to marketprices of other products, ability and timing of repricing), market constraints (facilities for redelivery and storage, take or pay), market trends, and “carbon view of selected product. Location of the market(s) affects both pricing (domestic markets versus international markets) and transport costs (capital and operating costs for some number of vessels to transport the product to market). Risks are wide ranging and can be underappreciated when making the investment decision. Technical risks could include intermittent variability or long term change of reservoir characteristics, ability to deliver the floating production facilities on schedule, variability in process performance (out of spec products), safety (process or marine operations), and maintainability (vessel or process equipment). Commercial/contractual risks include issues with product pricing variability, market economic fluctuations (including implementation of take or pay or cargo deferrals), and governmental or regulatory changes in laws, regulations (including Domestic Market Obligations), taxation, or cost recovery. LNG utilizes technology with significant onshore facility experience and this experience has been used to develop compact technologies applicable to offshore applications. FLNG is being progressed for several offshore developments, but has not yet been operated offshore. GTL has three processing options to produce “liquids: gas to methanol, gas to dimethyl ether (DME), and gas to “synthetic crude (syncrude). Methanol and DME facilities have been extensively operated onshore and this experience has helped develop compact technologies for offshore applications. Syncrude produced by the Fischer-Tropsch process has a few large onshore facilities. Reformer and reactor technologies have been advanced in pilot facilities to improve suitability for compact offshore applications. So far only one GTL pilot facility is being readied for offshore operations. This paper will provide investment decision input for the monetization of large remote deepwater gas developments involving all these considerations