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Floating LNG Projects May Have Peaked: Wood Mackenzie

Floating LNG projects may have peaked already amid intensifying competition in the liquefied natural gas space, a new report from Wood Mackenzie has suggested.

After the oil price collapse in 2014, floating LNG production projects were all the rage as the LNG market became oversaturated and prices tanked, with three of seven large-scale projects that got their final investment decision between 2015 and 2018 being for floating production and storage facilities, Wood Mac’s research analyst, Global LNG, Liam Kelleher said.

Since then, however, investors seem to have turned their attention towards higher-capacity onshore projects concentrated in the United States, with capex and operating costs being lower, Kelleher added.

“We expect this trend to continue, with high-capacity projects in the US, Russia, Qatar and Mozambique looking to take FID. The lack of economy of scale is likely to limit FLNG projects to small-scale and remote developments as it competes for buyers, financing and partners in a busy LNG marketplace,” the analyst said.

Not all is bleak on the FLNG front, however, according to Kelleher. If LNG producers manage to lower the costs of these projects, chances are this segment of the LNG industry could see a revival in the future.

On a global, scale, Wood Mackenzie said in an earlier report, this year could be a record year for LNG projects approved, with more than 60 mmtpa of capacity likely to reach final investment decision (FID). This will be well above the previous record of 45 mmtpa sanctioned in 2005 and triple the 21 mmtpa projects sanctioned last year.

“Frontrunners in the race to hit FID include the US$27 billion Arctic LNG-2 in Russia, at least one project in Mozambique and three in the US. Our picks in the US are Golden Pass, Calcasieu Pass and Sabine Pass Train 6,” the energy consultancy said in its 2019 outlook.

By Irina Slav for Oilprice.com

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