There is a big fundamental shift in the LNG market with buyers now seeking more flexibility in contracts
BY IZZAT RATNA / Pic By MUHD AMIN NAHARUL
The liquefied natural gas (LNG) business is leaning towards smaller-scale projects with lesser volumes amid soft and challenging market sentiment for the energy sector.
Petroliam Nasional Bhd (Petronas) VP of LNG Assets, upstream, Adnan Zainal Abidin (picture) said there was a big fundamental shift in the LNG market with buyers now seeking more flexibility in contracts — comprising smaller parcels and volumes with shorter contract tenure in a paradigm of abundance in supply.
“The days of having huge long- term contracts are getting more difficult. The buyers want to wait-and-see how the market pans out,” he said at a panel session during the Offshore Technology Conference Asia — special session on floating LNG (FLNG) in Kuala Lumpur yesterday.
“I think the smaller FLNG trains of around two million tonnes would be perfect in this current market scenario because we would not be seeing any 20-year contract tenure anymore in the immediate future,” he added.
Adnan said buyers are looking for three- to five-year supply contract period.
The second FLNG facility by Petronas in Sabah is slated for pre-commissioning by the middle of 2019 as it is 84% completed now.
Upon completion, the FLNG 2 facility will enable liquefaction, production, as well as the offloading of natural gas in the Rotan field, 240km off Sabah.
It is set to have a processing capacity of 1.5 million tonnes per annum. Adnan said the project is slightly ahead of schedule and major modules are planned for earnest lifting next month.
“We hope to lift the entire 16 modules by October this year and shortly after start to commence the integration work as these modules need to be connected with one and another.
“We are planning to put it in pre-commissioning towards the middle of 2019, in preparation for sail away by 2020,” he said.
Petronas is also planning to embark on several initiatives to reduce operational and capital expenditures.
According to Adnan, management is also strategising to reduce the number of personnel on board for the FLNG 2 to between 70 and 80 people from the existing 200.
“This would be a great help from a safety and logistic standpoint. We are moving towards more automation for future floaters,” he added.
Petronas became the first company to produce LNG from a floating production unit when the group loaded its first cargo from the FLNG Facility 1 in East Malaysia last year.
The Royal Dutch Shell plc, who is building the Prelude FLNG project in Australia, which will be the world’s biggest maritime vessels at a cost over US$12 billion (RM48 billion), is the other producer currently developing FLNG production facilities.
Japan’s Inpex Corp is building a similarly big FLNG unit in Australia as part of the US$37 billion Ichthys export project.