Shell and Technip Samsung Consortium closed deal
December 13th, 2012, Shell Gas & Power Developments B.V. (Shell) , Technip and Samsung Heavy Industries (Samsung) signed a Heads of Agreement (HOA) to strengthen their cooperation in the floating liquefaction of natural gas (FLNG) facilities.
Since 2009, Technip and Samsung cooperate together on the Shell Prelude FLNG project through their Technip Samsung Consortium.
Technip is leading the consortium based on its combined engineering expertise in LNG plants and large offshore infrastructures.
In addition Technip has a proven experience in managing the largest and most complex projects including to operate a fleet of service vessels.
Samsung owns one of the world largest shipyards with a global market leadership in the construction of drillship, ultra-large container ship, LNG carrier and Floating Production, Storage and Offloading (FPSO) vessels with a production capacity equivalent to about 70 units of conventional vessels and offshore facilities per year.
Shell to become global LNG Market Leader
On its side the super major company, Shell decided years ago to focus on the exploration and production of the natural gas under all its forms (LNG, FLNG, Gas to Liquid (GTL), Shale gas), so much that its actual revenues from gas exceed revenues from oil despite the low prices of the gas and the high price of the crude oil.
In November 2012 during its investors day in London, Shell confirmed its integrated gas strategy to become the world largest LNG producer and to invest $20 billion capital expenditure in LNG and GTL until 2015.
Shell estimates the global demand for LNG to double on the decade 2010 – 2020 to reach 400 million t/y by then, and 500 million t/y in 2025.
According to Shell this LNG production increase will require more than $700 billion capital expenditure in new capacities.
From its current 22 million t/y of LNG production, Shell is building 7 million t/y more in Australia and is planning additional 20 million t/y from projects in Australia, Africa and North America in order to meet its global LNG market leadership target.
Eyeing on the far reach offshore natural gas fields of the Timor Sea, Shell developed the generic design for a vessel allowing the production, liquefaction, storage and transfer of LNG at sea.
Together with Technip and Samsung, Shell converted this FLNG generic design into a concrete project, Prelude FLNG to be moored 200 kilometers offshore the North West coast of Australia in the Browse Basin.
Technip performed the engineering and procurement in Paris office, while Samsung started the construction on October 18th 2012 in celebrating the first steel cutting in its shipyard of Geoje in South Korea.
With 488 meters length and 600,000 tons weight, Prelude FLNG will be the world largest vessel ever built.
Shell, Technip and Samsung target FLNG leadership
In selecting Prelude name for this first FLNG vessel, Shell gave the clear signal that it should be the first one of a long series of FLNGs to find their place in Australia, but also in other Asia -Pacific countries such as Indonesia, Malaysia and New Zealand, or in other regions such as Africa and South America.
These last months the uncontrolled costs evolution of the LNG projects in Australia and the challenges for environmental acceptance of the onshore LNG facilities have turned the spot lights on the FLNG solution as to be costs effective and solving many local acceptance issues.
What happens today in Australia may occur in all other countries willing to develop its offshore resources opening a bright future to FLNG solutions and pushing all the companies such as ExxonMobil, ConocoPhillips, Petronas, to develop their own FLNG and to look for the best partners to do so.
In this context, Technip and Samsung had to position themselves to seize new opportunities but with the risk to dilute their actual competitive advantage through multiple partnerships.
Through their agreement with Shell, Technip and Samsung intend to capitalize on their Prelude FLNG experience to expand LNG production capacities per ton of vessel.
By its cooperation with Technip and Samsung, Shell relies on solid partners to implement its FLNG Lean Technology to access new gas fields and multiply FLNG vessels as most competitive solution in many countries.
With this agreement, Shell, Technip and Samsung, should announce on next months series of new FLNG projects to take advantage of their global market leadership.
