Brazil: Petrobras Delays FLNG Plan

Brazil’s state-controlled oil company Petrobras has postponed a costly plan to install a floating LNG platform in the Santos basin’s sub-salt areas, in favor of building a natural gas pipeline to shore.

“We have decided that for the 2011-15 period, the best route for the pre-salt gas transfer is not the floating LNG. The best route would be a gas pipeline,” the company said.

Industry executives point to the huge capital and operating expenses behind floating LNG. For example, Shell’s pioneering 3.6mn t/yr Prelude FLNG offshore Australia, is believed to cost more than $18bn. Leasing a floating liquefaction facility could reach $500,000/d, a source told Argus.

A natural gas pipeline can be constructed and operated at a fraction of the cost and holds technical advantages. Petrobras said it will decide by October between two possible pipeline routes.

“This decision was made because we can use the highest grades of gas through the gas pipeline… and provide the petrochemical industry with a richer gas. This adds more value and enables us to have better return at the moment,” the company said.

Petrobras’ recently revamped strategic plan, which included cuts in capital spending from earlier projections, forecasts Brazil’s domestic gas production will jump to 78mn m³/d in 2015 and to 102mn m³/d in 2020 – nearly double its 55mn m³/d current output.

But the company has not completely ruled out floating LNG. Earlier this year, three engineering groups were invited to bid for a design contract and Petrobras is still considering those plans. That tender called for a floating unit that could receive 12.7mn-14mn m³/d of feed gas and would have a send-out capacity of 2.7mn t/yr of LNG.

“We should have a final decision on the economical feasibility of the construction of an offshore floating liquefied gas terminal by October 2011,” the company said. “The floating storage and regasification unit is still being evaluated from an economic perspective.”

Brazil currently has two LNG terminals – the 14mn m³/d Guanabara plant near Rio de Janeiro and the 7mn m³/d Pecem facility in Ceara state. Petrobras is developing a third terminal with a capacity of 14mn m³/d in Bahia state, which should come on line in September 2013. The company also plans to expand Guanabara by 6mn m³/d by 2014. A fourth LNG terminal at an undetermined location is under consideration.

(argusmedia)

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Source: argusmedia, August 5, 2011; Image: petrobras