LNG Projects Boom, Including Floating Plants (FLNG)/America Begins LNG Exports

One way to distribute natural gas to high-demand markets like China and Japan is through LNG (liquefied natural gas). Also, the recent war in Ukraine led to sanctions against Russia and a cutback in Russia’s flow of vital natural gas into EU markets. LNG has the ability to provide much of the EU’s energy needs. However, due to the necessity of special handling, bringing that supply to market in major quantities requires advanced technologies and huge capital outlays. First, the natural gas must be chilled to minus 259 degrees Fahrenheit, in order for it to change into a liquid state. Next, the LNG is put on specially designed ships where extensive insulation and refrigeration maintain the cold temperature. Finally, it is offloaded at special receiving facilities where it is warmed and converted back into a gaseous state (“gasification”) suitable for distribution via pipelines.

Qatar is a world leader in the supply of LNG. The global LNG market includes two significant firms in Qatar: Qatargas and RasGas. This is due to Qatar’s ownership of one of the world’s largest conventional natural gas reservoirs, the offshore North Field. Qatar also welcomes foreign oil and gas firms, especially ExxonMobil, which owns the RasGas gas liquefaction facility there in partnership with Qatar Petroleum. Qatar’s largest LNG markets include Japan, India and South Korea. In 2022, the country launched a $28.75 billion project to expand LNG export capacity from its North Field East by 60% by 2027. QatarEnergy signed a joint venture agreement with Eni to boost capacity from 77 million tons per annum to 110 million tons, with QatarEnergy holding 75% interest and Eni the remaining 25%.

Malaysia and Indonesia are also major exporters of LNG. Additional sources include Nigeria, Oman and Russia. Australia and the U.S. have ramped up LNG production capacity and infrastructure.

A significant number of LNG-carrying ships have been launched recently, according to the International Gas Union (IGU). These unique ships, costing between $175 million and $200 million each, have the ability to maintain the extreme low temperatures of their cargos until the LNG is offloaded for re-gasification. Modern LNG ships have a carrying capacity of 165,000 to 266,000 cubic meters. The U.S. Energy Information Administration (EIA) reported that in 2020, U.S. LNG export capacity reached 10.8 billion cubic feet per day, up from 8.9 billion cubic feet per day in 2019. In 2021, U.S. LNG exports surpassed pipeline exports of natural gas for the first time an on annual basis, with exports hitting a new high of 11.9 billion cubic feet per day in March.

LNG facilities are immense engineering projects that take many years and serious financial commitments to complete. For example, Chevron spent $29.7 billion on its Wheatstone LNG project in Australia, which began shipping LNG in late 2017 and has a capacity of 38.4 billion cubic feet per year.

SPOTLIGHT: The Shale Gas Revolution Changed the U.S. from Potential LNG Importer to Major LNG Exporter

Output from shale formations has boosted America to be one of the world’s largest natural gas producers. However, this came as a huge surprise to many firms. In the late 1990s and early 2000s, before the shale boom picked up speed, LNG imports were expected to become a vital source for America’s gas needs, as domestic gas shortages were forecast by those who didn’t foresee the looming impact from horizontal drilling and fracking in shale fields. A major story in TIME magazine in July 2003 stated that Americans were headed into a shortage of natural gas that was so daunting that the U.S. petrochemicals industry (highly reliant on a steady supply of natural gas as a feedstock) might have to move to other nations.

This brought about significant investment in new LNG terminals in Louisiana and Texas, for import purposes. Cheniere Energy (www.cheniere.com) completed several new LNG terminals at great expense, during 2008-09.

By 2010, however, Cheniere completely reversed its strategy. Clearly, the supply of gas coming from America’s shale fields was so abundant that the gas industry should be exporting, not importing. Cheniere signed long-term contracts with major customers in Europe anxious to receive LNG exported from its Sabine Pass plants. The project received government approval in 2011, making Cheniere’s Sabine Pass location the first LNG terminal cleared to ship to countries where they U.S. did not have free trade agreements. Shipments began in early 2016. By 2024, Sabine Pass was producing 30 million tons per annum (MTPA) with five storage tanks (17 billion cubic feet equivalent (Bcfe)) and six trains in operation.

In February 2024, Cheniere filed an application with FERC for authorization for the Sabine Pass Stage 5 Expansion Project. The expansion is to include two large-scale liquefication trains, each with a capacity of about 7 MTPA and a production capacity of about 8.43 MTPA; a boil-off gas (BOG) liquefication unit with a capacity of about 0.9 MTPA; two full containment, above ground 220,000 cubic meter storage tanks with loading capacities; and connecting facilities and piping.

Cheniere has an ongoing agreement with China Petroleum & Chemical Corp. (known as Sinopec) to supply LNG to China, one of many long-term deals the firm has signed with Chinese companies. China has been significantly increasing its imports of LNG. Meanwhile, Cheniere continued to expand its export capabilities. This has been truly a revolution in the making, fueled entirely by the massive boom in the U.S. natural gas industry.

A revolutionary floating LNG plant (referred to as FLNG in the energy industry) project is in operation off the northwestern coast of Australia. Shell, working with a consortium comprised of Korea’s Samsung Heavy Industries Co. and France’s Technip SA, completed a $5 billion floating facility called Prelude that is 488 yards long and 82 yards wide (its weight is 600,000 tons when fully equipped and loaded, about six times that of an aircraft carrier). The ship required 1.6 million man-hours of design and engineering before construction. By processing LNG offshore, previously stranded reserves that were too remote to be feasible can be tapped. The facility can produce up to 3.7 million tons of LNG per year. Once an underwater field is exhausted, the floating plant can be towed elsewhere. Many other firms are active in FLNG.

ExxonMobil is also extremely active in natural gas/LNG production in the Australia area. China has a multi-year contract with ExxonMobil, valued at $50 billion, for the delivery to China of LNG from the Gorgon project, a vast natural gas and LNG facility jointly owned by ExxonMobil, Chevron and Shell.

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