The rise of the floating gas factory

A colossal floating gas factory moored in shallow waters off the Republic of the Congo’s coast began supplying Europe last week, bringing towards the mainstream a technology that was once sidelined by cost.  

The Nguya, operated by Italian energy major Eni, is longer than the largest US aircraft carrier and dwarfed the 300-metre tanker that pulled up to load its first cargo.  

Rising from its bright orange hull is a dense forest of pipes, towers, turbines and cooling units that can process millions of tonnes of gas a year from the offshore fields below. The Nguya cools the fuel to -162°C, turning it into liquid and drastically condensing its volume, allowing it to be transported economically to Spain and Italy.

For decades, such industrial alchemy has largely taken place on land, at vast liquefied natural gas terminals in producing countries such as the US, Qatar and Australia. But oil companies have long dreamt of moving that capability to the sea, building floating LNG plants that can tap gasfields beyond the reach of pipelines in the middle of the ocean. 

Early attempts were sobering. Shell’s $12bn Prelude vessel in Australia was hit by high costs and operational difficulties, reinforcing industry scepticism about whether floating LNG, or FLNG, could be commercially viable. 

But supporters now argue that both technology and economics have turned a corner.

“I like to try a new way [of doing things] and to stretch the technology,” said Eni chief executive Claudio Descalzi in an interview in the Congolese port of Pointe Noire. 

Eni believes floating plants offer speed, security and cost advantages, particularly in regions where building onshore is logistically complicated or politically risky. 

“Before, it was easier to develop LNG onshore, but it is not easy now. It became very difficult. See what is happening in Mozambique,” he said, referring to a $20bn onshore project by TotalEnergies that was delayed for five years by a deadly 2021 terrorist attack. 

By contrast, Eni’s Coral South vessel, which sits a few dozen miles offshore from the site of the assault, has operated uninterrupted since 2022. “The security is increased, and it is really segregated offshore,” Descalzi said. “In any case, it is cleaner as a process.”

The Nguya was built by China’s Wison and delivered in less than three years. Its giant Japanese-designed storage tanks were fabricated separately and lowered into the hull, an approach Eni says accelerated the timetable. Building a conventional plant in the Republic of the Congo, a country with no prior LNG experience, would have taken longer and cost more, said Descalzi. 

He estimated that the bill for floating LNG plants had fallen by as much as 40 per cent in recent years, to below $1bn for every 1mn tonnes a year of capacity, implying a price tag of less than $2.5bn for the Nguya.

The project’s total cost is likely to be far higher, since Eni also had to convert an existing floating platform, Scarabeo 5, into a pre-treatment vessel to separate gas emerging from undersea wells from oil and other liquids. 

Descalzi dismissed concerns that floating LNG plants cannot match the scale of onshore facilities, pointing to the upcoming Vaca Muerta project in Argentina. There he plans to deploy a fleet of vessels that will each be more than twice the size of the Nguya and will eventually be able to produce 18mn tonnes of LNG a year, comparable with some large US export terminals. 

Oil majors such as Shell were the initial pioneers of floating LNG but the business is also attracting new operators such as US-listed Golar, which converts old tankers into floating LNG units and rents them out to producers that do not want to commit to a huge upfront investment.

One of Golar’s ships, Gimi, sits offshore between Mauritania and Senegal under a 20-year lease to BP. The company’s US-listed shares have nearly tripled in the past five years. 

Kyle Haberberger, a floating LNG specialist at Black & Veatch, which supplied the Gimi’s liquefaction units, said Golar’s early successes had changed the industry’s perceptions.

“After the first one we did with them, in about 2018 . . . it showed this is a manageable project,” he told the FT last year. 

Africa has become a particular focus, combining abundant offshore resources with security challenges on land.

“In very recent memory you have some security concerns on land, but you also have a lot of offshore assets, where you have gas that needs to be commercialised,” said Fraser Carson, an LNG analyst at consultancy Wood Mackenzie. Latin America, including Guyana and Suriname, and parts of Asia-Pacific are also emerging markets.

Floating LNG can be especially attractive for fields with relatively short production lives. “You have perhaps reserves that are only going to be 10 or 15 years, so it doesn’t justify the expense of onshore,” Carson said. “But if you have an arrangement with Golar, it can be deployed for that time and then moved on.”

Shipyards are also moving towards more standardised designs to lower costs further, he added, saying “that is something that is not quite plug and play, but not far off”.

One complication is that the output of gas, oil and liquids varies from field to field, affecting how much treatment is needed before liquefaction. 

The majors remain cautiously supportive. “Floating technologies have been really helpful to expand the LNG business,” Peter Clarke, head of LNG at ExxonMobil, told the FT last year. 

But he noted constraints: ocean depths, currents and weather conditions can limit projects, as can the physical amount of equipment that can be stacked on a ship’s hull. Floating plants, typically powered by gas turbines, also lack the cutting-edge electric drives now used at some onshore terminals, making them less environmentally friendly.

Clay Neff, head of Chevron’s global upstream business, said the technology “continues to evolve and mature” and could prove decisive where “flexibility, footprint and speed to market matter”.

Meanwhile, Descalzi believes Eni’s determination to become a leader in the technology has already paid dividends.

“When Argentina decided to develop their gas in the shallow water offshore, they called us because we are experts in this field,” he said. “So it is a big plus.”