How FSRU’s are impacting LNG market evolution

The global FSRU fleet is rapidly expanding, increasing LNG supply chain flexibility and improving access to emerging buyers.

July 9, 2018

Floating Storage and Regasification Units (FSRU) combine the key elements of an LNG vessel and regas terminal in a single unit. This can significantly reduce the capex costs and lead times for connecting LNG to new markets or access points. It also adds commercial flexibility that is increasing in value as the LNG market evolves.

The emergence of FSRU

The FSRU business started relatively recently in 2001 when El Paso contracted with Excelerate Energy to build the first such vessel for the Gulf Gateway project.   FSRUs are closely related to standard LNG vessels.  But they have additional equipment to regasify the cargo and send it out onto customer or gas networks.

For several years FSRUs remained a relatively niche opportunity.  But more recently there has been a significant pick up in deployment of the technology as costs and capability have been optimised and FSRU units are being used to access new markets.

FSRU fleet size

The global FSRU fleet currently consists of approximately 30 vessels. In addition there is an order book of 6 vessels to be delivered by 2020, with options on another 10.

The first FSRUs were based on nominal 130,000 m3 LNG tankers with send out rates of 2-3 mtpa.  However the more recent vessels are larger – typically 173,000 m3 with send out rates up to 6 mtpa. The FSRUs currently under construction provide the same full processing capability as land based terminals including full boil-off gas management facilities using recondensers.

The three key reasons supporting investment in FSRUs are summarised in Table 1.

Table 1: 3 Key FSRU advantages

Advantage Investment drivers
Lower capital cost
  • The cost of a new FSRU can typically represent only 50-60% of an onshore terminal.
  • An onshore 3 mtpa terminal with one 180,000 m3 storage tank is likely to cost $700-800m, compared to $400-500m for a similar capacity FSRU.
  • However lower capex needs to be set against higher opex of FSRU (depending on charter rates).
  • Opex can be between 0.4-0.7 $/mmbtu dependent on commercial terms & load factor.
Shorter lead time
  • FSRUs can be delivered in half the time of an onshore terminal.
  • Lead time is typically driven by construction of onshore infrastructure (not development of the FSRU unit).
  • A new FSRU unit takes around 2.5-3 years to contract and a conversion of a conventional LNG vessel around 1.5 years.
  • But lead times can be accelerated by utilising/moving existing FSRU units e.g. the second Egypt FSRU was completed in just 5 months.
Greater flexibility
  • FSRU can be used as either a floating regas terminal (with storage), a floating storage unit or as a conventional LNG vessel.
  • This additional optionality can add significant value given the right market conditions.
  • FSRU can provide an early gas option prior to a decision to build a permanent onshore terminal
  • There is also an ability to ‘retire’ (& re-use) FSRU infrastructure at relatively low cost which reduces risk around stranded regas assets (4 have been retired to date)
  • Combined FSRU/power combinations (FSRU tethered to a barge with gas-fired generators) are gaining traction in emerging markets
  • FSRU physical flexibility translates into greater commercial flex for operators (e.g. ability to redeploy).

Source: Timera Energy

In addition to FSRUs there are currently 4 floating storage vessels (FSUs) in operation, one in Malta and 2 in Malaysia. All are converted LNG tankers. There is also a small-scale FSU operating in Bali. A further FSU is currently being constructed for Bahrain LNG.

LNG market impact

The main impact of FSRU technology on LNG market evolution is to provide quicker and more flexible access to new sources of demand.

Markets that currently rely on FSRUs to import LNG include Colombia, Pakistan and Egypt. Bangladesh (4 mtpa) and Bahrain (6 mtpa) are currently developing facilities due online in 2018-19.

Potential future locations are focused on emerging markets or locations more isolated from other gas infrastructure.  These include Hawaii, Caribbean, additional Indonesian & Malaysian archipelago markets, Sth Africa, Kenya, Vietnam, Phillipines, Croatia, Myanmar and developing African coastal states.

FSRUs are also supporting the evolution of commercial flexibility in the LNG market.  Commodity traders are targeting FSRU projects because of their flexibility and optionality.  Trafigura and Gunvor are developing projects in Pakistan and Bangladesh.  Vitol is looking to partner with Total to do a further Pakistani project.

This interest reflects the capability of FSRUs to be a significant source of growth in supply chain flexibility.

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