Watch out for the impact of floating LNG (FLNG) storage in 2017 and 2018, particularly during the seasonal “shoulder months,” Genscape advised.

In a piece by LNG and natural gas analyst Ted Michael, the firm expects an increased global need for floating offshore storage as U.S. and Australian liquefaction trains continue to ramp up.

“With the 40% rise in global supply will come an increased need to track floating offshore storage and the total volume of LNG at sea, for a more complete understanding of global supply and demand,” Michael wrote.

Global production was about 991 MMcm/d (35 Bcf/d) at year-end 2015, Genscape said. By 2019, with U.S. and Australian plants completing construction and shipping output, plans are for production to hit about 1.4 Bcm/d (50 Bcf/d). The problem is that traditional markets—Europe and Northern Asia—are not offering demand growth as a result of regulations, competition from other fuels and price controls.

But the supply will increase, which may turn LNG ships into floating storage units, similar to crude oil tankers in that segment of the industry.

Michael cited an article in PortVision: “Low prices and abundant supplies have created what is being called ‘homeless LNG:’ liquid natural gas without committed buyers being housed in tanker ships roaming the high seas.”

Genscape sees two classes of FLNG storage: ships delayed offshore, like those that have been observed backing up in Tokyo Harbor; and floating storage and regas units (FSRU).

The first is caused by lower-than-expected demand and has occurred recently offshore Japan and South Korea. In this situation, utilities are reluctant to be caught short until winter peaks.

FSRUs have a dry dock build turnaround time of 12 to 18 months and can be leased or installed for less than $300 million. This gives them a significant cost advantage over land-based regasification plants and storage facilities that can take up to four years to build and cost as much as $1 billion.

—Joseph Markman

Offshore