Asian Firms Aim for First Offshore LNG Output

TOKYO (Nikkei), Apr. 21, 2010

Kawasaki Kisen Kaisha Ltd. is looking to help fire up the world's first offshore liquefied natural gas (LNG) production platform in 2014 for PTT PCL, Thailand's state-owned oil and gas company, the Nikkei reported in its Wednesday morning edition.

The Japanese shipping company will operate the offshore facility, located at a gas field in northwest Australian waters, through Flex LNG Ltd., which is based in the British Virgin Islands. Kawasaki Kisen holds a 15% stake in Flex LNG.

An official agreement is soon expected to be reached to produce LNG for PTT at the gas field, to which the Thai firm holds concession rights.

Under the plan, 1.5 million to 2 million metric tons of LNG will be produced annually and then shipped to Thailand. The total cost of setting up a floating LNG platform there is estimated at Y120 billion.

Flex LNG has already placed an order for four floating LNG production bases at South Korea's Samsung Heavy Industries Co. Although just one facility will be used in conjunction with PTT, Flex LNG has ordered three more to prepare for future expansion. The final tab for the four facilities may reach as high as Y500 billion.

Without the need to build a pipeline to deliver gas from the ocean field to an onshore LNG plant hundreds of kilometers away, production costs are expected to be slashed by as much as two-thirds.

For example, a conventional setup in the same area would cost up to $2,000 for each ton of LNG produced, but using an offshore facility is expected to lower the figure to around $700.

Such a drastic reduction would make developing gas fields with annual output of 1-2 million tons economically viable. It is estimated that more than 2,000 of these small and midsize gas fields exist worldwide. Bolstering supplies and lowering prices would be highly beneficial for Japan, which is the world's biggest LNG importer.

According to various estimates, global demand for LNG stood at 180 million tons in 2009. While demand in China, India and other emerging countries continues to grow, the fuel is also becoming popular as an alternative to coal and oil in industrialized countries due to its lower carbon dioxide emissions. As a result, worldwide LNG demand is forecast to jump to roughly 400 million tons a year by 2020.

Copyright (c) 2010 Dow Jones & Company, Inc.


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