The move into gas
For more than 30 years, the technology to treat both liquid petroleum gas (LPG) and liquid natural gas (LNG) on floating units has existed. As early as 1973 SBM undertook model tests for Shell on an LNG floating system and in 1976 the company supplied a mooring system for the Arjuna LPG FPSO in Indonesia.
Yet for a series of technical and commercial reasons, widespread floating gas production has remained scarce into the early 21st century. In Roger Maari's 1985 book Single Point Moorings, he outlined the likely future for this potentially huge market and how floating units could play their part in it.
Gas flaring in the 1980s was already attracting criticism as a wasteful and polluting practice. Maari listed the three main alternatives:
. compression for reinjection into the reservoir or for transportation to shore by pipeline
. refrigeration to liquify the gas into LPG or LNG for shipment to shore
. conversion to a commercial product such as methanol or ammonia to be transported to shore
. using gas to produce electricity for transmission to shore by submarine cables.
As Maari pointed out, the key factor in popularising any of these options would be economic. While gas production remained more expensive than oil production and the unit price remained far below that for oil, this would form a natural deterrent to exploitation.
Despite these problems, SBM foresaw that offshore gas production would eventually become both feasible and commercially attractive. So the company embarked on a series of project proposals in the 1980s in order to capitalise on the fledgling market, whenever this breakthrough moment occurred. Projects included floating methanol plants, floating ethylene storage and import units to work in Alexandria harbour offshore Egypt and a floating gas fuelled electricity power station offshore Ghana in West Africa.
Although none of these projects were realised, SBM was nevertheless building up a significant body of knowledge and expertise on floating gas production, an asset that would pay dividends in future, once technological and commercial factors reached a critical balance.
By the mid-1990s, offshore gas treatment facilities were beginning to emerge. SBM leased two major units in 1995, the Nkossa II LPG FSO offshore Congo and the Tantawan gas compressor and export unit offshore Thailand, both of which remain active in 2008.
As Roger Maari identified in 1985, there are major technical obstacles to the large scale production and export of LNG. "The low temperature process and the potentially dangerous product requires the use of sophisticated equipment and controls which in an offshore environment are more susceptible to failure," he wrote.
For SBM, the challenge to produce sophisticated equipment in a dangerous environment has always been a spur to innovation and to commercial progress. Achieving what others fail to achieve (or are too scared to attempt) has kept the company at the forefront of the industry for many decades. Gas production has been no different.
For example, developing high pressure gas swivels was crucial to industry progress. New materials and high specification engineering were needed to cope with gas production at high pressure and extreme temperatures. When dealing with LNG, the technology to store and offload a liquid at minus 160 degrees has meant engineering work at the highest level, creating new processes and pioneering new technologies.
In commercial terms, LNG production also presents challenges. Roger Maari appreciated this back in 1985 when he wrote: "long term contracts for the sale of LNG are required to ensure the economic viability of the project. Even for land-based plants, these contracts have often been difficult to arrange. In general, it can be concluded that the offshore LNG plant is unlikely to be a viable proposition in the short term."
More than two decades later, SBM has played an important role in bringing the offshore LNG plant closer to viability. In 2004 the company established a dedicated gas division, in response to the rising value of gas related to oil and the express determination of major oil consuming countries (such as the US) to increase their reliance on gas as an energy source.
"The world needs more energy and sources of oil are depleting," explains the head of SBM's gas division. "There are two challenges: to replace the existing production and to find additional energy. It is partly a question of unlocking 'stranded' gas fields that have so far been neglected by gas producing companies, and to establish a chain between the gas field and the kitchen."
Multiple fields are known about in very deep water, or that are too small, or where there is insufficient demand on the beach. Yet with the price of gas appreciating even more quickly than oil, these fields are crossing the line from uneconomic to profitable.
"There are five key issues to producing LNG offshore," says the head of SBM's gas division. "First, mooring to the seabed, which is not a problem for us. Second, receiving the gas, cleaning it and making it ready for export. This involves taking out any water or heavier hydrocarbons. Again, we have already done this. From here, SBM and the industry in general is stepping into the unknown. The liquification process has never been done offshore yet. Once cooled, the LNG will be stored in tanks and the facility will stay on site for up to 20 years, which again has never been done before. And finally the LNG has to be offloaded, with all the difficulties of transferring very cold liquids."
The complexity of such an operation would be greater than for FPSOs, meaning that SBM has already begun the next stage of its technical evolution, through understanding the science and engineering needed to deal with this fuel. "Gas is always more dangerous than oil," says one SBM engineer, "because you can't see it. You can always see oil."
When in its liquid state, LNG is one six hundredths of its volume as a gas, so that as soon as its temperature rises even slightly, it expands dramatically. Maintaining a liquid at minus 160 degrees is a highly complex task, especially in the tropical environments of West Africa, where a good deal of LNG production will probably be based. At these temperatures, regular steel becomes as brittle as glass, adding to the danger of a fire or explosion or leakages. "A lot of the engineering is focussed on preventing accidents happening," explains the head of SBM's gas division. "We have formed a partnership with a German company called Linde to develop LNG equipment. They have their own processing technology but they lack offshore expertise, so we can bring that to the venture."
Whatever the challenges, SBM is determined to remain at the cutting edge of the oil and gas industry, so overcoming whatever obstacles are put in the company's way is a necessary next step. "We believe there is a need for it," says the head of SBM's gas division. "It is a complex technology but we will master it."
SBM has also had to understand the commercial model for LNG. "In the oil industry, there are a great many onshore terminals and potential customers," says the head of the gas division. "You can decide half way through a trip to divert to Norway instead of the US, for example. But with gas, you need to be sure that you have a customer who will buy everything you produce, in advance.
"The International Energy Authority predict that demand for gas will grow much faster than for oil. And as the world changes its energy demand from oil to electricity, there will be more demand for gas - it's cheaper and cleaner and is replacing oil and coal. The new gas energy projects that are emerging today are already sold for 15 years in advance. This means that banks are willing to finance investment in them."
Just as buoy systems came under strong demand in the 1970s and 1980s for use in politically unstable or remote locations, the same is becoming true of LNG FPSOs. Where a gas field is discovered in an environmentally protected area such as a coral reef, there is additional pressure to process the fuel offshore.