World's First FLNG Arrives off Sarawak

Petronas' first floating LNG unit, the PFLNG Satu, has arrived at the Kanowit gas field off of Sarawak – bringing it one step closer to becoming the world's first producing full-scale FLNG. It is expected to come online sometime this year, well before Shell's massive Prelude FLNG, which is thought to be as much as two years behind schedule. Industry observers suggest that Prelude may not leave shipyard before the second half of 2017. 

The Satu is designed to produce 1.2 mtpa of LNG and can operate in water depths of 200 to 600 feet; she will have a crew of 145. Her small size is intended to help Petronas monetize fields that are too small or too far offshore to be worth connecting to the mainland by pipeline; by comparison, Prelude has a design capacity of 3.6 mtpa and will have a crew of more than 220. 

Petronas already holds 24 mtpa of onshore production capacity at three facilities on Sarawak, all fed by its offshore fields. The Wall Street Journal reported at the end of May on Petronas' talks with Jera – the gas purchasing joint venture of Japanese utilities Tepco and Chubu Electric Power, expected to become the world's largest buyer of LNG – for the sale of a $200 million stake in its Sarawak LNG assets. The deal would raise new funds at a time of reduced income for Petronas, which has had to cut costs and lay off staff due to low oil prices. 

In addition to other cost-saving measures, the firm has delayed implementation of its second FLNG project at the Rotan gas field offshore Sabah, Malaysia for two years, pushing it back to 2020. (Sabah has been in the news lately for maritime kidnappings attributed to the Islamist group Abu Sayyaf, but Rotan is on the opposite side of the island from these incidents.) The decision to delay the project is expected to affect the finances of South Korean shipbuilder Samsung Heavy Industries, which is building the second plant. 

Although Petronas’ first FLNG installation is still going ahead, it may not turn a profit right away. Gas prices are linked to oil, and "if the oil prices traded above $70 per barrel, [PFLNG Satu] would see a double-digit internal rate of return. But, at the current oil prices, it is challenging to estimate the return,"  said Petronas vice-president and LNG project director Datuk Abdullah Karim, speaking at a panel last year.