How it works
The FLNG facility will float 250 meters above its target gas field, extract the riches from beneath the sea floor, clean and process the natural gas into LNG and other liquids, store them in the massive tanks located under its deck, and then offload the booty to LNG carriers that come cruising on by. Engineers have created a system that uses cold water from the ocean floor — at the rate of 50 million liters per hour — to help cool the LNG tanks. Ocean water is nowhere near the -162 Celsius needed to liquefy natural gas, but it will save millions of dollars and valuable deck space while protecting the facility’s cargo from ambient temperatures.
Green LNG
This engineering marvel will eliminate hundreds of miles of pipelines and alleviate traffic in some of Australia’s busiest ports. It also keeps traffic away from Australia’s Great Barrier Reef, which adds more than $6.4 billion to the country’s GDP each year. Decades from the now, when the gas field is depleted or no longer economical, the ship can float over to the next big offshore opportunity. It could also mine smaller reserves that are not economically recoverable by other means, perhaps including valuable methane hydrate deposits.
An industry shift?
While a handful of multinational companies such as Gazprom and Petronas are planning or building their own FLNG facilities, several high-profile projects opted out at the last minute. Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), and Royal Dutch Shell plc (ADR) (NYSE:RDS.A) were initially considering floating facilities for their massive Gorgon and Wheatstone projects but ultimately decided against it. However, the fields are so massive — expected to triple Australia’s LNG capacity — that there will be plenty of opportunities for future FLNG capacity. That’s especially true given Royal Dutch Shell plc (ADR) (NYSE:RDS.A)’s presence, which was responsible for nudging the group toward FLNG in the first place.
INPEX and minority partner Total are building a hybrid FLNG facility for its Browse Basin project. The facility will extract and clean natural gas offshore before shipping it 885 kilometers to an onshore processing facility. Condensate and other liquids will be available for offloading to carriers offshore. Browse will have twice the capacity of Prelude, but will cost 2.7 times as much to build. With a final price tag of $34 billion, perhaps Shell is onto something.
Foolish bottom line
Although it seems unlikely that all offshore gas deposits will be developed by FLNG facilities in the future, innovations from Shell will ensure that costly onshore facilities aren’t the only option on the table. Not only does Prelude represent a discount to a similarly sized onshore facility, but its lifetime can also be extended well beyond that of the initial gas field. That could be a major selling point for companies with large offshore reserves scattered across the globe and give Shell the upper hand in partnering with new projects. This could be as big of a game-changer for the company — and investors — as it is for the industry.
The article Is Shell Making a Sequel to “Waterworld”? originally appeared on Fool.com is written by Maxx Chatsko.
Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter, @BlacknGoldFool, to keep up with his writing on energy, bioprocessing, and emerging technologies.The Motley Fool recommends Total.
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