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Daewoo Ship Venture May Beat Shell as First Floating LNG Vessel Operator
By Kyunghee Park – Sep 14, 2010 10:15 PM ET
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Daewoo Shipbuilding & Marine Engineering Co. said its Papua New Guinea energy venture may beat Royal Dutch Shell Plc to become the first operator of a floating liquefied natural gas production vessel.
The venture could begin using a floating LNG unit in 2014 to process gas from an onshore field, Kim Jin Seok, chief executive officer of DSME E&R Ltd., the shipbuilder’s oil and gas arm, said in an interview yesterday in Seoul. Shell is due to receive the first of as many as 10 floating LNG plants in 2016 for use off Australia.
“We could well be the first to produce gas from a floating LNG facility — sooner than Shell,” Kim said. The Papua New Guinea venture expects to receive government approval for its plans by next month and will likely order the first of as many as three floating LNG vessels from Daewoo this year, he said.
Using floating LNG technology will cut production costs for the venture by about 50 percent and avert the need to buy land from hundreds of owners for a 340-kilometer (211-mile) pipeline, Kim said. Woodside Petroleum Ltd. and Petroleo Brasileiro SA may also use similar technology at offshore fields as energy companies push further out to sea in search of new gas supplies to meet surging energy demand.
“Producing LNG offshore will reduce costs and enable us to start operations faster,” Kim said. The floating unit will be able to process 3 million metric tons of LNG a year and store 235,000 cubic meters of gas, he said.
First Daewoo Order
The floating LNG unit will be the first such ship to be ordered from Seoul-based Daewoo, the world’s second-biggest shipyard. Kim declined to comment on the price of the vessels. Shell’s ships, which will be larger than aircraft carriers, may cost as much as $5 billion each, according to estimates by shipbuilder Samsung Heavy Industries Co.
LNG facilities chill natural gas into a liquid form, allowing it to be shipped between points not connected by pipelines.
Orders for floating LNG production vessels may rise as gas demand could outstrip supply as early as late next year, said Tony Regan, a consultant at Tri-Zen International Ltd. and a former Shell executive.
“Supply is not growing fast enough,” he said. “What this is signaling is that the market is going to tighten quite quickly.”
The Daewoo venture, which is also backed by Hoegh LNG Ltd. of Norway and Papua New Guinea-based Petromin PNG Holdings Ltd., is already talking to potential customers in South Korea and southeast Asia, Kim said. Production will begin after the floating LNG unit is delivered, he said.Daewoo set up DSME in 2007 to explore and develop oil and gas fields as part of plans to pare its dependency on shipbuilding. The Papua New Guinea field is the unit’s first investment in a production venture. The company is considering developing more fields, Kim said.
“We are getting a lot of interest including from countries in the Middle East who want to work with us,” he said.
Daewoo rose 5.2 percent to 26,350 won at 11:13 a.m. in Seoul trading. The shipyard has gained 51 percent this year compared with a 79 percent climb for Hyundai Heavy Industries Co., the world’s biggest shipbuilder.
Global demand for gas may jump almost 50 percent by 2030, according to Shell. The energy company, based in The Hague, The Netherlands, ordered its first floating LNG facility from Samsung Heavy and Technip SA in March. The deal was the first under a 15-year supply contract signed last year.
Samsung Heavy, based in Seoul, also has contracts to build four smaller floating LNG vessels for Flex LNG Ltd.
The Woodside-led Sunrise venture, which is also backed by ConocoPhillips and Shell, is pushing to use floating LNG technology to develop a field off East Timor. The southeast Asian country has so far opposed plans for any project that doesn’t include an onshore plant.
Petrobras, Brazil’s state-controlled oil company, said in June it’s studying bids from Technip, SBM Offshore NV and Saipem SpA to build a floating unit for use off the coast of Brazil.
Santos Ltd., Australia’s third-largest oil and gas producer, and GDF Suez SA also intend to use the technology as they develop fields in the Bonaparte Basin off Northern Australia.