03 July 17 The Business Times by TAN HWEE HWEE
SINGAPORE'S leading yard group Keppel Offshore & Marine (O&M) is on track to deliver the world's first converted floating liquefaction vessel (FLNGV) to Golar Hilli Corporation, a subsidiary of Golar LNG.
The vessel, named Hilli Episeyo at a ceremony on Sunday, is scheduled to be delivered to Golar Hilli Corp in August. Keppel Shipyard was awarded the US$735 million contract to convert a liquefied natural gas (LNG) carrier into the FLNGV for Golar Hilli Corp in 2014.
Hilli Episeyo will be put in operation offshore Kribi, Cameroon, for its end clients, Societe Nationale des Hydrocarbures and Perenco Cameroon SA.
The announced contract was the first of its kind in the world in 2014. Now with Hilli Episeyo nearing delivery, Singapore is set to stake a claim on delivering the world's first converted FLNGV.
Liquefaction of natural gas has traditionally taken place at purpose- built onshore plants. But with the advent of FLNGVs, oil companies now enjoy greater flexibility in deploying and redeploying liquefaction plants for the purpose of extracting and exporting natural gas to shore.
The world's first FLNG vessel that was purpose-built from scratch entered into operations earlier this year, which means the floating liquefaction technology is now considered proven.
However, as Keppel O&M chief executive officer Chris Ong pointed out, converted FLNGVs "are significantly more cost-effective and faster to market".
What the delivery of Hilli Episeyo implies, as Golar LNG CEO Oscar Spieler explained, is that LNG projects, even those seeking to extract reserves from remote, marginal and stranded gas fields, can now be viable in a low commodity price environment.
Keppel O&M is understood to have scored its first FLNGV conversion contract from Golar Hilli Corp partly on the strength of its extensive track record in executing conversion projects.
Another household name in the O&M sector that has worked extensively with Keppel Shipyard on FPSO (floating production, storage and offloading) vessels and FSRU (floating storage regasification unit) conversions is BW Offshore.
BW Offshore has worked with Keppel Shipyard on 12 FPSO projects thus far and has entrusted the yard group with the modification of the two FSRUs in its fleet. The O&M player also has a longstanding working relationship with Singapore's other leading yard group, Sembcorp Marine.
"Singapore has over the past 12-13 years built a solid reputation in the area of modification or conversion of LNG carriers and FSRUs. Knowing that our assets are in the hands of experienced yards is critical in business transactions where delivery schedules and reputation give us a competitive advantage," BW Offshore said.
Even with its vast experience in delivering FPSO vessels and in FSRU conversions, the yard group had to scale a new learning curve when dealing with issues unique to FLNG conversion, Mr Ong said.
For instance, the yard group needs to work around existing storage areas in the LNG carrier designated to undergo the conversion to house the massive equipment for pre-treatment and liquefaction of natural gas.
"The volume of work involved is also much more than typical conversion works. We added 37,000 metric tonnes of new steel and equipment, and 1,800 kilometres of cabling to the 42-year-old vessel," Mr Ong said.
IHS Markit's APAC Lead Ang Dingli applauded Keppel O&M for its efforts in taking on a new challenge with the conversion of the Hilli Episeyo.
"Singapore needs to take on more complex O&M conversion projects as lower-cost yards in China have already made inroads, especially into the lower-end of the conversion market," Mr Ang said.
He also suggested that Singapore can strive to stay relevant in the O&M conversion business by taking on "EPC-type" projects. EPC (engineering, procurement and construction) projects typically call on the yards to take on greater project risks such as a larger engineering scope.
But if the contracts are managed within expectations, such increased risks from executing EPC projects can be rewarded by higher contract values and better margins.
Golar LNG has two other standing deals for converted FLNG vessels with Keppel.