An emerging Liquefied Natural Gas (LNG) technology that has grown around the world in the past two decades is the Floating Storage Regasification Unit (FSRU). The FSRU is a floating LNG import terminal, which is used while transiting and transferring through the oceanic channels.
The FSRUs and onshore LNG import terminals take up LNG, regasify it (taking it from the liquid form, where it is reduced in the proportion of 600:1) and expand it back into a gaseous form, which is used to generate electricity for domestic and other allied purposes.
The FSRUs are custom-built vessels, similar to LNG carriers but with an ability to transform LNG back to the gaseous state. Both facilities, the LNG import terminals and FSRUs, need a berth for the LNG ship, storage tanks and pipelines. But the land-based terminals can cost more than USD 700 million with a peak capacity of about 7.75 million tons every year.
While LNG is leading the bull markets right now in the energy sector, the FSRU market is at the leading edge of this. The technology is becoming increasingly popular in developing countries, due to its low start-up costs and fast speed to market. The FSRUs cost less than half the cost of an onshore facility.
Advantages of FSRU
- The onshore facilities can take between 5 and 7 years to be planned, constructed and brought online, while the FSRUs are not only easier in implementing, but cheaper.
- A newly built FSRU costs close to USD 260 million. Some companies have even started converting old LNG carriers into FSRUs, for which the cost is more like USD 160 million, and can be ready in just 14 to 16 months.
- FSRUs, compared to their onshore counterparts require little construction or investment, and can therefore provide access to LNG much faster.
Disadvantages of FSRU
- FSRUs have one major drawback, its capacity limitations. Most have a peak capacity of around 4 million tons annually (about 500 million cubic feet per day), though some of the new ones are getting closer to 1 bcf/d.
- Offshore units have less scope of expansion, because of their capacity constraint. A FSRU has a maximum regasification capacity of 600-800 million standard cubic feet per day and can store between 140,000m³ and 180,000m³ of gas.
- Another issue with the FSRU is the lifespan. Usually the leasing arrangements of FSRUs are for ten to twelve years.
Technically, a FSRU can be operative for 20 years after commissioning, possibly more with the appropriate overhauling. Onshore terminals are designed to operate for 25 years and some of them can carry on for up to 40 years.
After a careful assessment of life span, investment and topography of a project, several companies have opted for FSRU instead of a full-fledged LNG import terminal. The usage of FSRU is more prevalent in developing countries.
In 2008, a mere 1 per cent of regasification units were FSRUs, whilst in 2016 they made up 10 per cent. This proportion looks set to continue to increase to 15 per cent of the market by 2020.
Low investment is important for emerging economies, as many of them may not be capable of investing higher amounts (of USD 400 million), necessary for an onshore terminal. The nations get an edge with an easier and faster entry into the LNG market, helping their economies to grow by providing power.
In 2016, there were 78 FSRUs online, with more under construction. These vessels were in countries which had smaller amounts of existing LNG capacity. The list includes emerging economies like Bangladesh, Vietnam, Pakistan, Philippines, Ghana and South Africa.
FSRUs for the Future
The current trend indicates that the FSRUs are gaining popularity in emerging economies because they are easy to finance. The leasing contract of a FSRU includes the facility and its operation and maintenance. Besides, capital investment in these projects is limited to the mooring facilities and onshore receiving facilities for which investment might be around USD 100 million.
FSRUs are popular in developing nations as opposed to strong economies and gas markets such as the US and Europe. The majority of FSRUs at the moment are located in Latin America, the Middle East and Asia regions where they were predominantly present compared to onshore LNG terminals.
Long-term players in the market usually do not opt for FSRU solutions. There is a wide range in both limitations and benefits, but how popular the FSRUs are going to be in the future depends on the long-term energy goals of the investing country and other stakeholders.
Sea News Feature, November 14