Sheila McNulty Floating LNG terminals to take public heat off gas production

The technological advances in the oil and gas patch just keep coming. While everyone has been scrambling to catch up with the shale gas revolution, the industry has been working on another potentially significant breakthrough in gas. This one is in producing gas that has long been stranded offshore in areas too far or too small to warrant a pipeline to shore.

Royal Dutch Shell recently announced it would be the first producer to invest in a multibillion dollar project to capture this gas. The project will be a floating liquified natural gas terminal – known as a FLNG terminal in the industry – that makes it economic to get at such gas fields. No pipelines need to be built. Shell just produces the gas until it runs out and then moves along to the next field.

Others have been studying the idea. Some have even been moving forward on it. But none have backed it up with a major decision or the dollars Shell has pledged to commit. Indeed, Shell’s FLNG terminal will be the biggest offshore facility in the world at 488 metres long and weighing some 600,000 tonnes – six times that of the largest aircraft carrier.  It won’t say exactly how much the mammoth project will cost. But that may be a wise thing with something so new. Nobody really knows until the last screws and bolts are put into place.

What is important is that Shell is going ahead with its plan. The company estimates stranded gas reserves around the world at 240,000-290,000bn cubic feet, though Neil Gilmour, Shell’s general manager for FLNG, says this is a conservative estimate and does not take into consideration gas which is stranded in either shallow water, very small fields, ice-prone areas, or those yet to be found.

And as the world continues to look for fuel to meet global demand, gas will surely become more and more of a hot commodity, given it has a lower carbon intensity than oil or coal – the world’s other major fuels – and technological advances are making it cheaper to produce.

Certainly the ability to extract gas from shale has raised supplies substantially. But producing onshore comes with its own set of problems.  Right now environmentalists are questioning whether the technology used in that process – horizontal drilling and multi-staged hydraulic fracturing – are contaminating ground water. Regulators are investigating. And some local governments in the US have banned the practice. In France, the government has come out against it.

But with FLNG, the industry will be offshore and out of the public’s line of vision – as the old saying goes, out of sight, out of mind. In those regions that are having difficulties producing gas onshore, it might prove to be one of the best ways for the industry to ensure a ready supply of gas production as demand rises in the year ahead.