Keppel O&M, SembMarine set to make LNG shipbuilding foray
Keppel Offshore & Marine and Sembcorp Marine are eyeing
shipbuilding orders from an expected uptick in small-scale liquefied natural
gas activity.
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Tan Hwee Hwee
28 October 2015
Keppel Offshore & Marine and Sembcorp Marine are eyeing shipbuilding orders from an expected uptick in small-scale liquefied natural gas activity.
LNG shipbuilding is now within reach of Singapore yards due to demand for smaller vessels. Previously, the yards were limited by land scarcity to mainly ship conversions or repairs for LNG vessels.
Small-scale LNG vessels are also needed for bunkering purposes, with ports ramping up infrastructure development to ensure the availability of low sulphur fuel - LNG being one key option - before the International Maritime Organization implements the global sulphur cap.
Michael Chia, managing director for marine and technology at Keppel O&M, told The Business Times that Singapore was poised to benefit from LNG development in the region.
He said that Indonesia was set totake the lead globally, rolling out tenders for miniaturised gas-to-power solutions to fulfil President Joko Widodo's 35 gigawatt electricity plan.
Already underway is a tender issued by state utility Perusahaan Listrik Negara for the supply of LNG to 32 locations across Kalimantan, Sulawesi and Java, attracting bids from 11 oil companies, trading houses and vessel operators - Shell, Mitsubishi and Gas Natural Fenosa being among those named.
These 11 companies are known to have sounded out Asian shipyards for the required infrastructure - ranging from small gas carriers to floating regasification to gas-to-power solutions - to complete the LNG value chain that would meet Indonesia's energy demand.
Whereas South Korean shipyards have dominated in the construction of large LNG carriers, an Indonesian source pointed to the need for under 70,000 cubic metre LNG tankers in the South-east Asian country, which opens up the contest for newbuild orders out of Indonesia to yards in Singapore as well as China.
Indonesia will require foreign investment support to realise Mr Joko's electricity plan, which could put shipbuilders there ahead of their Singapore counterparts in its small-scale LNG game.
But Mr Chia maintains that Keppel O&M and other Singapore shipyards could still bank on the near-to-market advantage compared to the Chinese, in addition to building on technological competencies over potentially lower-cost competition in China.
Small-scale LNG activity is also not just restricted to Indonesia. South-east Asia's other archipelagic country, the Philippines, as well as in and around the Caribbean Islands and developing inland cities of China have also been identified as potential destinations for small-scale LNG developments.
Besides LNG shipping, Keppel O&M and SembMarine are also well-placed, with their established track records, to pursue floating storage, regasification unit (FSRU) contracts stemming from efforts by governments in these countries to fast-track the building of LNG import capacity. The advent of small-scale LNG has also opened up FSRU newbuild possibilities for yards in Singapore that have previously focused on conversion projects.
Keppel O&M is seeing enquiries for up to 60,000 cubic metre FSRUs, Mr Chia said, adding that the yard intends to pursue newbuild contracts for units of 60,000-75,000 cubic metres. He said that Keppel O&M would continue to offer shipowners the conversion option for larger FSRUs, which by his estimate, could fast-track the delivery of the finished product within 12 months. FSRUs take two to three years to build in South Korea.
SembMarine, meanwhile, is promoting a proprietary small-scale regasification to power generation solution. Its scalable and modular Gravifloat concept provides for an LNG terminal to be constructed at a shipyard and transported to a shallow-water location for installation.
SembMarine added that the Gravifloat concept can be adapted to suit most soil conditions and upgraded for operations in more exposed and harsher environments.
Of the 35 FSRU and near-shore floating LNG prospects that the industry identified worldwide, said Keppel O&M's Mr Chia, the majority is FSRUs, as lower oil-linked LNG spot prices support construction of import instead export infrastructure. He also expects that, at most, 10 FSRUs will take off in the next three to four years.
Having commenced talks with Golar LNG for a fourth floating LNG conversion at Keppel Shipyard, Mr Chia is also confident that industry players tend to take the longer-term view of the LNG export market, especially with the use of clean burning fuel proliferating beyond the JKM (Japan Korea marker) market.
The dynamics of LNG market, noted Mr Chia, have evolved from large-scale onshore export projects underpinned by long-term offtake agreements between large producers - Petronas MLNG and Qatargas LNG - and big-time consumers in Japan, South Korea and Taiwan.
For some field operators, a long-term offtake agreement is still required to justify investment in a newbuild floating LNG, but vessel operators with access to financing such as Golar, stand to break out by opting to go with floating LNG conversions.
Golar's floating LNG concept, GoFLNG, is premised on delivering cost savings over newbuild units based on the conversion of second-hand Moss LNG carriers readily available in the market. By Mr Chia's estimate, using existing Moss LNG carriers will shave US$100 million alone from the construction of new storage tanks for floating LNG purposes.
Nonetheless, construction of the first of three Golar floating LNG conversions commissioned to Keppel - the Hilli FLNG - entered full swing only after Golar finalised a tolling agreement with the end client, Perenco.
With the blessings of the government of Cameroon, Perenco reportedly allocated 500 billion cubic feet of gas reserves in the Kribi fields to the Hilli FLNG, supporting 1.2 million tonnes per annum of output.
The local government is supportive of liquefying Kribi gas for export, which will fetch higher prices over piped gas. The limited pool of reserves at Kribi, however, meant newbuild floating LNG would not be economically viable for commercialisation, but which is made possible through the use of a converted floating LNG from Golar.
Mr Chia sees potential for further application of the Golar floating LNG - pegged to 1-2.5 million tonnes per annum throughput - in helping more independent field operators monetise other gas prospects off West Africa.
Golar was appointed mid-stream partner of Ophir Energy, for the development of Block R gas resources off Equatorial Guinea. Mr Chia expects the Gimi FLNG - earmarked for Ophir Block R - and also the Gandria FLNG to reach final investment decision in 2016.
The trio of Golar floating LNGs are to be equipped with Black & Veatch single-mixed refrigerant (SMR) process for liquefying natural gas.
In seeking to free up deck space of a floating LNG from installed liquefaction facilities, Keppel O&M has separately developed the PreNEx micro-LNG plant system. Mr Chia said that the use of nitrogen, a non-flammable gas as the refrigerant in PreNEx meant that most of the equipment can be stored below deck.
He added that PreNEx boasts a lower equipment count than the dominant SMR system and is thus more space efficient. Keppel O&M is looking at applying its proprietary PreNEx technology in further floating LNG projects.