FLNG: A case study in innovation

Transcription

1 FLNG: A case study in innovation Innovation Open House Canberra, Australia Matthias Bichsel Projects & Technology Director, Royal Dutch Shell plc November 28, 2013

2 Matthias Bichsel became Projects & Technology Director on July 1, In this capacity, he is responsible for Shell s contracting and procurement as well as technology development and deployment. In addition, he has oversees Shell s safety and environmental performance. He joined Shell in 1980 after obtaining a doctorate in geology from the University of Basel, Switzerland. Matthias has worked for Shell companies and affiliates in Bangladesh, Oman, Canada, Indonesia, the USA and the Netherlands. In 1995, he became director of Petroleum Development Oman, looking after exploration and deep oil-field developments. In 1999, he transferred to Houston as managing director of Shell Deepwater Services.There, he was involved in all aspects of deepwater exploration and development on a global scale. From 2002 to 2006, he was Executive Vice President in charge of global exploration. And from 2006 until his current appointment, he was Executive Vice President - Technical for Shell Exploration and Production. He is a member of the American Association of Petroleum Geologists and the Society of Petroleum Engineers, where he is Member of the Industry Advisory Council. In 2011, he was appointed an honorary professor at the Chinese University of Petroleum, Beijing. A Swiss citizen, Matthias was born in He is married to Suzanne, and they have a daughter.

3 The demand for natural gas is growing globally. Fortunately, gas is plentiful, widespread and clean burning. It is an ideal power-generation fuel. But some of the world s gas fields are found under the ocean, far from the mainland. The cost of developing those resources might have been prohibitive without the technological and commercial innovations that led to the floating liquefied natural gas (FLNG) concept. Shell s FLNG projects can turn economically challenged offshore gasfield developments into new sources of clean energy, new jobs and new revenue streams for governments and business partners. Good morning, ladies and gentlemen. It s a pleasure to see you all here today at this Innovation Open House. I hope this event can go some way to show how Australia deserves top billing in innovation on the global stage. And I don t think we need to turn the world upside down to put Australia on top. But then again, there s no reason not to either I d like to spend the next 20 minutes or so talking about floating liquefied natural gas FLNG because it s such a great example of both technical and commercial innovation. And it s set to happen here, at the top of the world, in Australia. FLNG in facts & figures Right now, however, a lot of the action is still in South Korea, in Samsung s Geoje shipyard. There, one of the most remarkable gas plants you could ever imagine is taking shape. The plant is unique in many respects. For example, it s the first time that a liquefaction plant has been so intimately connected with a gas-production system. That s a bit like building a flour mill on top of a combine harvester the raw material from a field goes in and a consumer product comes out. As well as producing LNG, the plant will produce two other gas-derived liquids: liquefied petroleum gas or LPG and condensate. And it will store all three products and safely offload them onto the ships that transport them to where they are needed. But what really sets it apart from every other LNG plant that has ever existed is the fact that it is designed to go to sea. (I guess you might have already figured that out.) The facility will be moored above Australia s Prelude offshore gas field, 200 kilometres from the nearest shoreline. And there it is expected to remain for some 25 years, producing LNG, LPG and condensate. At this point, we at Shell normally like to list all kinds of facts and figures about the FLNG facility. We can t resist comparing it to football pitches, aircraft carriers, Boeing 747s and local landmarks too. So, let me have a go Its length has been expressed in terms of Melbourne cricket grounds (three, as I understand). And the amount of steel used in the construction is related to the number of Sydney harbour bridges you could build (five, I m told). And I reckon three buildings like the one where we are now the National Library of Australia in Canberra could just about fit below deck. These whimsical comparisons are fine; they help people appreciate its scale. But there is far more to the project than sheer size. What I would like to do today is to go beyond the impressive statistics and examine what lay behind the innovations that have taken Shell FLNG from concept to construction. The promise of gas They say: Necessity is the mother of invention. And could there be a greater necessity than to provide energy to a world with a growing population?

4 It is estimated that by 2050 there will be 9 billion people on the planet, up from slightly over 7 billion today. The number of road vehicles is forecast to more than double. And many more people throughout the world will have access to electricity for lighting, refrigeration and cooking. As a result, total energy demand is expected to be at least twice the level it was at the turn of the century. And if you add to this the imperative to cut CO 2 emissions well, then you have quite an equation. Most analysts, not least those at the International Energy Agency, believe that to have future supply equal future demand to solve the energy equation, in other words we will need to call on a range of energy resources. Natural gas stands out among the possible options. Between 2010 and 2050, while demand for both coal and oil is forecast to peak and then decline, gas demand is set to go only one way and that is up. At Shell, we fully support the logic and validity of this forecast. There are three main reasons for the emphasis on natural gas as an energy source. Gas is acceptable, affordable and abundant. Acceptable: The carbon dioxide emissions of combustion are the lowest of any fossil fuel. Moreover, it doesn t give off the unhealthy pollutants and particulates associated with coal. We see what s happening in China, where the impact on air quality of coal-fired power stations is alarming. Power generation is expected to account for two-thirds of the increased energy demand in Asia over the next 20 years. Gas surely has to be a part of the long-term answer there. And that takes me to affordable. The cost of building a gas-fired power plant, per megawatt-hour of electricity produced, is estimated to be less than half that of a coalfired plant. Incidentally, it is a fifth that of a land-based wind farm, and a tenth of an offshore wind farm. Finally, abundant. The IEA has estimated that global gas resources amount to 800 trillion cubic metres enough to last 230 years at current levels of consumption. Let me pause here for a reality check. Most of that 230 years supply of gas is not simply on tap, ready to be connected to your stove. Some of it is lying in geological formations far from markets, and some of it is widely dispersed and only trickles into wells. This is not all easy gas, by any means. Still, tremendous technological advances over the last several years have made it worthwhile to pursue some of this bountiful gas. New seismic-survey methods, new drilling techniques and new production technology have all contributed. We have also seen LNG become an established global industry and gas-to-liquids chemistry emerge from the laboratory. These developments can now be integrated into projects that extract gas from under the ground and process and deliver it in a useable form to where it s needed most: in population centres all around the world. Which brings me nicely back to FLNG. A 15-year journey Like those technologies I just mentioned, FLNG was originally developed to help realise the promise of natural gas specifically, to bring gas to the global market from small offshore fields in areas lacking infrastructure especially pipelines. As many as half of those stranded gas fields are thought to lie in Australian waters. The Prelude field is a perfect example, and so it was deemed to be an ideal candidate for the first FLNG project. But I think it is worth highlighting that work on FLNG began at Shell in the mid-1990s 15 years or so before the decision to go ahead with Prelude.

5 Now, even back then Shell already had plenty of experience building land-based LNG plants and floating oil facilities. In fact, we were involved with the very first commercial LNG plant in Algeria in 1964, and we pioneered the concept of a floating production storage and offloading vessel in Spain in But bringing those different kinds of expertise together into one hybrid facility has had its share of challenges ones that could only be cracked with a large dose of innovation. Just defining the concept underlying the FLNG facility took 1.6 million hours the equivalent of 800 years work. Fortunately, that work was not done by a very old, solitary genius. In fact, the work originated as an outlandish idea that could easily have been dismissed as a pipe dream and forgotten. But it was kept alive over the years by Shell s GameChanger programme. Founded in 1996, the programme is designed to quickly and affordably prove the viability of an idea that has the potential to significantly impact the future energy system. To date, GameChanger has worked with more than 1500 innovators and turned more than 100 of their ideas into reality. One of its first grown-up brainchildren was FLNG. Eventually, more than 600 engineers became involved. They carried out feasibility evaluations, conceptual studies, safety and environmental assessments, and market and economic analyses. And this was all before the final investment decision. Today, some 5,000 workers are busy at the shipyard in Geoje one of the few with a dry dock large enough to accommodate the construction. Some of those workers are currently preparing for the installation of the 100-metre-high turret mooring structure that is being built by another 1,000 people in Dubai. As I said earlier, one can be forgiven for focusing on the construction work at the shipyard, because everything about it is simply so mind-bogglingly big. But I m going to turn things on their head again. I m going to venture to say that what is truly so amazing so innovative about the Prelude FLNG is how small it is. Even though the Prelude facility is rather large by comparison to other offshore oil and gas production facilities (in fact, there s none bigger), it s small by comparison to an onshore LNG plant. On land, the main parts of an LNG plant can be kept several hundred metres apart. At sea, that spaciousness is impossible. So Shell engineers reduced the footprint of the processing and cooling equipment itself the liquefaction train, as we call it to one-quarter the size of that of the onshore facility. But that was not enough. They also had to stack various pieces of equipment on top of each other which, I should stress, required quite a bit of clever engineering. In the end, a patch of water no more than 488 by 74 metres in size was enough to fit everything necessary to produce, process and liquefy gas so that 5.3 million tonnes of valuable liquid can be delivered every year for a quarter of a century. But what really makes this feat of engineering even more amazing is that the safety risks involved with this re-configuration are as low as reasonably practicable. We made sure to keep a safe distance between a highly protected accommodation unit and the most potentially hazardous parts of the process. This was a critical consideration when determining the overall size and shape of the facility. Cooling capacity was also a big issue. But we realised that we could take advantage of the natural coldness of the deep waters of the ocean: the FLNG facility dangles eight one-meter diameter pipes 150 metres into the ocean to suck up low-temperature

6 seawater. A bit like octopus tentacles. But they re fastened together, and spiral fins wrap around the corner pipes, so that they don t flop around when the facility moves or water currents shift. The experts call that avoiding vortex-induced vibration. As everyone who has tried to shift place in a canoe knows, it is not just the cramped space that can make that manoeuvre tricky; it s also the pitching and rolling. The same applies to the Prelude facility. But in its case we re talking about motion induced by wave swells and wind gusts. Fortunately, in the maritime world size does matter. It gives the Prelude facility remarkable stability even in the fiercest cyclones. And the bearing assembly on the fixed turret enables the entire facility to swivel around to adopt the orientation that minimises the combined assault of waves, winds and currents. But even a gentle rocking motion can result in liquid sloshing that might disrupt processing equipment and affect the tank walls. So we conducted many detailed computer simulations and scale-model tests in designing the shape and structural reinforcement of the LNG tanks. We are now confident that the Prelude s tanks suppress sloshing even when they re half full and in any case have sufficient strength to withstand the hydrodynamic forces should it occur. As you can imagine, the rocking motion also makes it tricky to offload the LNG, when a carrier vessel comes alongside the Prelude. A lot of effort went into working out how to accomplish this safely. In the end, we opted for a double-counterweight loading arm that can extend down as far as 10 metres to reach the LNG carriers that Prelude dwarfs. Commercial innovation There came a point in our FLNG journey around 2008, in fact when we had defined the concept to our satisfaction. We knew we could make the thing work. But we then had to think more about how to bring it into reality how to deliver FLNG projects. Realising we needed different skills and experience, we teamed up in 2009 with French engineering specialist Technip and the Korean shipbuilder Samsung Heavy Industries. Straight away we went into the front-end engineering and design of our first FLNG facility, subsequently assigned to the Prelude field. At the core of our agreement with Technip and Samsung was the objective to build not just one but several FLNG facilities. So, from the start, the emphasis has been on developing general design packages that can be readily mixed and matched for any given specific field development. That flexible approach to a standardised design has made it possible for Shell engineers to propose an FLNG facility specifically for dry gas fields. Dry in this case means devoid of the heavier hydrocarbon components that constitute LPG and condensate. The entire substructure, the living quarters, the safety systems, the LNG tanks and offloading systems they re essentially the same as those on the Prelude facility. But since there is no LPG and little if any condensate to deal with, a lot of processing equipment has been removed to make room for a second gas-liquefaction train. Regardless of the particulars of an FLNG project, the objective in every case is to reduce the cost of delivering the next project and to complete it faster than the time before. To help ensure this sequential improvement, Shell has set up a global FLNG programme team with the remit to capture and communicate learning points as we go along, to develop best practices and carry them over from project to project. It s not a small team: we have around 60 people in Shell offices around the world (including

7 Perth), in Technip s office in Paris and, of course, at Samsung s yard in Geoje. You could argue that the future of FLNG for Shell lies with this team. It s a big responsibility. Infectious innovation I said earlier that the FLNG concept was first proposed for the development of small, remote gas fields in areas lacking production and pipeline infrastructure. And I m convinced we ve now achieved that capability. But as the concept has been developed, the realisation has grown that the FLNG technology has more to offer. Shell s view of its potential applicability has widened. This is also a feature of innovation something new is created and that stimulates people to question how they normally do things, and that in turn leads them to create more new things. The best innovation is infectious in this way. FLNG is now increasingly being seen as a potential route to the development of offshore gas fields of various sizes even field clusters, perhaps where subsea pipelines are an issue or the onshore element of the project is uncertain or constrained. This could be for any number of reasons: technical, political, economic or indeed environmental. In this regard, FLNG provides unprecedented flexibility. Upfront infrastructure investment is no longer an issue. And, unlike land-based liquefaction plants, an FLNG facility can be redeployed. For these reasons, FLNG makes it possible to consider the development of less-certain prospects: fields where the amount of gas or the recovery level cannot be predicted with complete confidence. It also has the potential to keep capital expenditure in check, so that Australian LNG can continue to compete with LNG from other countries even when local construction costs rise. These considerations, I believe, are what has convinced the Browse joint-venture partners to go with Shell s FLNG up to three facilities as the basis for their project. Global & local benefits FLNG offers resource-holding countries like Australia a way of extracting value from their resource. A local independent consulting firm has estimated that the Prelude project will contribute 45 billion Australian dollars to the national economy over its 25- year life. Some of that money will go to the treasury as tax, and some of it will go to Australian providers of goods and services. Then there are jobs to think about. It s estimated the Prelude project will create 350 direct jobs and 650 indirect ones. And these in the main are not boom-and-bust construction jobs but career-opening jobs in high-tech operations, maintenance and other services. Shell has 550 people in its Perth office now, and we expect this number to increase towards 1,000 in the years to come. And there s potentially more. With careful stewardship, Australia can become the recognised world centre of excellence for FLNG. The opportunity is there, the opportunity to stake out a niche position in industry with everything that this entails in terms of supply-chain value creation and people development. Such know-how can be built up in a couple of decades a single generation. Take Aberdeen in Scotland as an example. Until the mid 1970s it was caught in the stagnating industries of fishing and textiles. Today, it is a bustling city that is a centre for a thriving offshore oil industry. What s more: companies based in the city are now offering their expertise to offshore operators all over the world. Does a similar good fortune await Broome?

8 Conclusion I started my talk today by referring to the fanciful statistics that are used to describe the Prelude FLNG facility its length in terms of cricket grounds and its steel content in terms of harbour bridges. And I suggested that, as eye-opening as these stats are, they might distract us from the reasons that Shell embarked on the long journey to bring the FLNG concept to where we are now. I ve finished with some more statistics about money and jobs. They actually are far more important than the fanciful ones, because they are about value in an economic and social sense in an Australian sense. They don t require comparisons with anything else; they are immediately clear to anyone. Ladies and gentlemen: FLNG is such a good case study in innovation because it meets a vital need, stimulates engineering ingenuity, opens up exciting commercial opportunities and stands to create real value on so many levels. Thank you for listening.

9 Recent speeches by Shell s senior leadership Asia s energy future, Peter Voser The power of innovation in collaboration, Matthias Bichsel Keynote speech to the Royal Dutch Gas Association (KVGN), Peter Voser Investing in the future, Peter Voser Shell s recommendations for a more competitive EU energy policy by 2030, Ben van Beurden Not all fields are created equal, Matthias Bichsel Mexico s energy future: an era of investment,m innovation and imagination, Marvin Odum Conquering new frontiers together, Andy Brown Sharpening Europe s competitiveness, Peter Voser Realising Australia s natural gas potential, Peter Voser Gas at the heart of a sustainable energy future, Andy Brown The role of technology, innovation and partnership in meeting global energy demand, Peter Voser The path to a more sustainable energy future, Peter Voser Getting the future energy mix right: How the American shale revolution is changing the world, Peter Voser In-depth innovation for the future, Matthias Bichsel Managing talent to address energy challenges, Hugh Mitchell Do the research, Matthias Bichsel The high road to innovation and technology, Matthias Bichsel For information about Shell, including downloadable versions of these speeches and other publications, please visit Shell International B.V., Permission should be sought from Shell International before any part of this publication is reproduced, stored in a retrieval system, or transmitted by any other means. Agreement will normally be given, provided the source is acknowledged. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this publication the expressions Shell, Group and Shell Group are sometimes used for convenience where references are made to Group companies in general. Likewise, the words we, us and our are also used to refer to Group companies in general or those who work for them. These expressions are also used where there is no purpose in identifying specific companies.