OREANDA-NEWS. April 15, 2014. A rendering of Prelude, which is expected to be the largest floating structure ever built. It will be completed in 2016. Royal Dutch Shell

High costs are driving energy companies into the sea.
In an effort to cut expenses, an increasing number of natural-gas producers are planning to pack entire gas-production plants onto superships bigger than aircraft carriers instead of building expensive land-based industrial complexes.
These huge floating gas factories are creating a multibillion-dollar market for Asian shipyards, especially South Korea's Hyundai Heavy Industries Co. 009540.SE -0.24% , Samsung Heavy Industries Co. 010140.SE -0.78% and Daewoo Shipbuilding & Marine Engineering Co. 042660.SE -0.31%
The new fleet of floating liquefied natural-gas vessels, or FLNGs, also demonstrates how the global race to provide cheaper gas supplies to Asian economies is pushing the boundaries of technology in the oil and gas sector.

Oil and gas exploration is going deeper and farther into the oceans, and the size of gas discoveries is shrinking, making it more economical to build a single floating facility and move it over multiple locations.
A floating project also takes around "two-thirds of the time that an equivalent land-based project would take," Ciaran McIntyre, head of compliance projects at Lloyd's Register in Korea said. A typical land-based project is prone to bureaucratic delays, expensive land procurement, high labor costs and stringent environmental regulations. Mr. McIntyre said the efficiency of the shipbuilding sector will help drive the floating gas industry and Asia's future gas supply.
The concept of a floating gas factory is so far untested. Ship-based hydrocarbon facilities have been around for decades, but these new floating production plants will be the first to liquefy gas to minus 160 degrees Celsius on the high seas.

"It's nearly as complicated as making tea on a [moving] bicycle, but we have the technology to do it," an engineer at a major Korean shipyard said.
The world's first FLNG vessel will likely be Texas-based Excelerate Energy L.P. and Toronto-based Pacific Rubiales Energy Corp.'s PRE.T +2.43% joint gas project off the Colombian coast, set to start in the first quarter of 2015. It will have a capacity of half a million tons of gas production a year and is being built in China by Shanghai-based Wison Group.
However, the most talked-about project at last week's annual Gastech conference in Seoul was the massive Prelude FLNG project led by oil major Royal Dutch Shell RDSB.LN -0.87% PLC. Project partners include Japan's Inpex Corp. 1605.TO +1.91% , South Korea's state-run Korea Gas Corp. 036460.SE +2.25% and Taiwan's CPC Corp.

The Prelude is expected to be the largest floating structure ever built. Spanning the length of more than four soccer fields, the Prelude will be about 1,600 feet long (488 meters) and 243 feet wide and will have a production capacity of 3.6 million metric tons of LNG a year, enough to meet Hong Kong's annual gas demand.

Its size is testing the prowess of Korean shipyards. "If you don't see the vessel itself you cannot realize what it means," Alain Poincheval, project director for Prelude at Technip said, adding that the vessel is being designed for the harshest environmental conditions at sea including Class 5 cyclones.

Prelude, which is being built by Samsung Heavy Industries, is expected to finish construction by the first half of 2016 and industry estimates put the project cost at roughly USD11 billion- USD 12 billion.

Despite the unproven technology, a number of other FLNG projects are already under development.
New projects in the works include Woodside Petroleum Ltd. WPL.AU +0.15% 's Browse project off Australia, Shell's Abadi project offshore Indonesia, and two projects by Malaysia's state-run Petroliam Nasional Bhd.

As many as 30 floating liquefactions projects are being planned globally, with 14 in the U.S. and six in Canada, amounting to 120 million tons of incremental gas supply in the next decade, said Kathleen Eisbrenner, chief executive of U.S. gas company Next Decade LLC.