Delivering Offshore Gas to Regional Mid-Markets: Assessing the Comparative Merits of Floating LNG and CNG Transport Routes
Authors: Verghese Joe Thottungal 
Published: April 2012

The emergence and near exponential growth of regional gas markets has beendriven by a number of factors, including a decisive shift of the power sectorto natural gas fired power stations, the burgeoning demand for gas at citygates, and switch of industrial consumers to natural gas from other fossilfuels.

While onshore baseload projects continue to be aggressively pursued forsupplying the larger established markets, the emergence of gas and LNG regionalmid-markets has stimulated interest in technology solutions directed at themonetization of medium to smaller gas reserves. A significant portion of thepotentially exploitable gas reserves today fall into this mid-tier category. The pressure to bring these mid-tier reserves (estimated to be in the excess of2,000 Tcf) to the market is compelling.

For offshore mid-tier gas fields, the deployment of floating liquefaction units(FLNG) offers an interesting pathway to emerging mid-markets and currently isthe subject of much industry focus. Floating CNG (FCNG), prominent in thespotlight in the early 2000s is now re-emerging as a viable gas transportationconcept and is offered as an alternative to FLNG for the delivery of gas frommid-tier gas reserves to regional markets. FCNG, for example, offers a dramaticreduction in terminalling costs compared with FLNG.

The paper outlines the opportunity domains for application of abovetechnologies (reserve volumes, gas quality, distance to market etc.) andrespective readiness for market. It compares and contrasts these competingtechnologies, assesses their merits in meeting value chain objectives, andevaluates them from a standpoint of scalability and flexibility forredeployment.

The paper also reports on the current application status of the technologies, the claims of the respective technology proprietors, and the industry's viewsof these claims.

Concluding the above analysis, the paper focuses, by way of example, on anotional opportunity to demonstrate the competing economic and commercialmerits of these alternative approaches to monetization of mid-tierreserves.

Introduction

The remarkable growth in gas demand over the past decade has led to thedevelopment and installation of a significant number of LNG baseload plants. These baseload projects have focused on the exploitation of relatively largegas reserves, typically 5 Tcf+. These baseload projects are often underpinnedby long term Sale and Purchase Agreements which were necessary to secureproject financing and guarantee the off-take of LNG product. However, gasmarkets are now witnessing a structural change, with the emergence ofmid-markets i.e. regional markets which typically are an aggregate ofrelatively small gas and LNG trades. Typical of this are LNG supply parcelsdelivered from coastal storage terminals or small onshore LNG liquefactionplants, and often distributed by road tankers and vacuum jacketed containers tocities and towns in the hinterland. The emergence of these mid-markets hasgenerated interest in the monetization of medium to smaller gas reserves.

A significant portion of the potentially exploitable gas reserves today isoffshore stranded gas. Developers and operators have been looking atopportunities to bring these stranded reserves profitably to markets.