A second wave of FLNG investment expected

Global FLNG capital expenditure (capex) is expected to total $52.8bn over the period 2019–2024, according to the latest analysis from Westwood Global Energy Group.

As LNG exports take a foothold in the US, investment in floating liquefaction facilities in North America will play a pivotal role in global FLNG expenditure over the forecast, accounting for 45% of expenditure. A combination of drivers, including perceived technological maturity, an improved macroeconomic outlook, and cost reduction in the supply chain, will support an increase in project sanctioning over the next 24 months.

‘Following a 22-month hiatus in project sanctioning, the FLNG industry is moving into a “second wave” of developments, with the market opening up to a greater number of participants. The size and technical complexity/risk of early pioneer developments allowed only the largest national and international oil companies (NOCs and IOCs) to move forward with projects on a balance-sheet financing basis. As more FLNG units become operational, we are seeing project structures and financing more akin to the well-established FPSO sector. This includes a move to syndicated project financing (eg as arranged for Eni’s Coral South unit) and construction financing/sale and leaseback structures (such as Golar’s Hilli Episeyo unit),’ notes the market analyst.

‘Increased gas demand driven by economic growth and fuel switching, combined with ongoing concerns over energy security, underpins the import vessels market. The key driver for the use of floating units remains the short lead-time from sanction to operation and consequently, tendering activity for FSRUs is expected to remain strong over the 2019–2024 period.’

Key conclusions in the World FLNG Market Forecast 2019–2014 report include:

• Over 2019–2024, liquefaction vessels will account for 80% forecast expenditure, totalling $42bn. This investment will subsequently lead to the installation of 15 FLNG vessels and an addition of 47.9mn t/y to global export capacity by the end of the forecast period.
• With the challenging market conditions seen over 2015–2017 starting to ease, forecast FLNG expenditure is expected to grow at a 14% CAGR, as operators seek to take advantage of the current competitive pricing structure within the oilfield services and equipment sectors.
• Forecast liquefaction spend in Africa will total $15.4bn over 2019–2024, with 34% of this spend already committed.
• Gas-to-power projects will account for a significant proportion of import vessel demand in Africa and Asia.
• Strong global fundamentals for regasification vessels have prompted some leasing contractors to sign letters of intent (LOI) for optional units to be delivered in the latter years of the forecast.
• A total of 18 countries are expected to have their first floating import vessels installed over the forecast period.

Figure 1: Global expenditure on FLNG facilities by region, 2013–2024
Source: Westwood Global Energy Group