New Market Access Opened by FSRU
With the growing popularity of short-term and spot contracts, the flexibility of LNG supply is also gaining in importance. Not to mention, more remote areas that don’t have access to gas infrastructure are feeling the hunger for available LNG. What could address all these market needs? The answer is unambiguous – it’s floating storage and regasification units (FSRU).
They have an advantage of being cheaper and faster to implement than land-based terminals. It takes about 3-5 years to build an onshore terminal and even longer to develop a fully functioning, complex infrastructure. The costs for these projects could amount to more than a billion US dollars. With FSRU’s these numbers significantly dwindle to 2 years for building and 250 million dollars for costs. What is more, this doesn’t diminish its usefulness, since FSRU provides flexibility and can be placed offshore where nearshore constructions are unattainable.
These benefits make it possible for emerging markets to get in on the gas trading action, which previously had been out of their reach. For instance, FSRU’s have been a starting point for Chile in the gas import market. Having established a cheap access to LNG supply, the country could invest in a more long-term solution such as building onshore terminals.
A similar situation is developing in Bangladesh, where the first natural gas pipeline has been constructed and three more are being planned. In the meantime, while the demand for LNG in the country is still growing and is estimated to reach over 8 mtpa after 2020, the supply will come from two FSRU’s with a combined capacity of 7.5 million tons of LNG per year.
The push for FSRU to open new markets comes from LNG sellers as well. Qatar is facing a diminished volume of LNG sales due to supply deals with Japan expiring in the coming decade and strong competition emerging in the form of Australia and the US. Working in conjunction with Qatar Gas Transport Company (Nakilat) and Norway’s Höegh LNG, Qatar seeks to utilize the easy access provided by FSRU’s to become new LNG suppliers for as yet untapped markets.
Even with all the possibilities allowed by the use of FSRU, there are still roadblocks that might arise when starting to participate in gas trading. The novice importers could experience difficulties navigating the bureaucracy of getting different licences and permits, necessary for marine operations and the importing of LNG. For example, it took ten years for Pakistan to find a viable solution to implement their first FSRU. Other issues are also possible, especially for countries without any experience of LNG handling, such as violent ocean conditions that may complicate the unloading of cargo or maintenance challenges which might require specialized training of the crew.
Ultimately, potential risks notwithstanding, FSRU is the right first step for new markets to enter into gas trading and also to ensure supply security and price competitiveness.