FEATURE: Wave of progress for UK, Ireland floating LNG import projects

News date: 08 June 2020Source: https://www.spglobal.com/platts/en/market-insights/podcasts/crude/061520-oil-gas-rapidan-biden

London — New projects to develop floating LNG infrastructure in the UK and Ireland have taken significant steps forward in recent weeks, as companies look to secure additional flexibility for the countries' inter-linked gas markets.

The UK currently has three operational LNG import terminals, while Ireland has none and, despite some high-profile plans for new facilities such as Shannon LNG in Ireland, appetite for new facilities had been weak given the high amount of existing regasification capacity in Europe.

However, LNG utilization rates across Europe have soared over the past year or so due to the major ramp-up in global LNG liquefaction capacity.

UK-based InfraStrata -- developer of the 500 million cu m Islandmagee gas storage project in Northern Ireland -- in late May agreed a provisional deal to buy a 5 million-6 million mt/year floating terminal to be located at Barrow-in-Furness, Northwest England.

A final deal for the project -- whose budget is estimated at some GBP350 million-450 million ($442 million-$568 million) -- is expected by the end of July, with a final investment decision set to follow within three years.

InfraStrata agreed last July with Cayman Islands-based company Meridian Holdings to hold exclusive talks about the development of the FSRU.

"The continued traction that we have been receiving from global players within the LNG markets since the day we announced the exclusivity agreement last year, validates our belief that this FSRU project is strategic and crucial to the UK's future gas supplies," CEO John Wood said.


Partners, LNG offtake


The capex for the FSRU project is expected to be funded by putting together a consortium of partners.

"Discussions with key partners have commenced -- a consortium consisting of globally recognized companies involved in the development, construction, operations and commercialization of regasification terminals worldwide will be formed in due course," InfraStrata said.

Offtake discussions geared towards long-term capacity offtake have also commenced with leading LNG trading houses, it said.

InfraStrata said the estimated annual project revenues would be in the region of GBP80 million-100 million with a 25-30 year project life.

The project, it said, would add to the UK's security of gas supply by: helping to balance the gas network during peak demand days; providing optionality between storing LNG, regasifying LNG and sending it to the grid; and enabling the long-term storage of regasified LNG for future withdrawals from underground gas storage.

The UK has three operational LNG import terminals -- two in Wales (Dragon and South Hook) and one in southeast England (Isle of Grain).

A fourth site at Teesside in Northeast England is currently idled, although trader Trafigura has a license to redevelop the facility.

A Trafigura spokeswoman told S&P Global Platts there was no update on project progress, pointing to a previous comment that the company remained committed to the project and was awaiting the "right market window" to trigger work.


New Ireland project


Meanwhile, across the Irish Sea, a new FSRU project has emerged, with its developer stressing it would not depend on the import of fracked US shale gas -- a major point of contention for two other projects under consideration in Ireland because of environmental concerns.

Predator Oil & Gas Holdings -- best known for its upstream work in Morocco, Ireland and Trinidad -- intends to apply for an Irish LNG import license following the execution of confidentiality agreements with a global supplier of LNG and an owner of LNG regasification vessels.

A new subsidiary company, Predator LNG Ireland, is being formed to move forward with the contracting of an FSRU with a send-out gas capacity suitable both for the peak demand market in Ireland and for long-term security and diversity of energy supply.

"The FSRU solution will facilitate the import of LNG using gas feedstock from a transparent origin that is not dependent on fracking operations related to shale gas exploitation," Predator said.

Two other LNG projects are being developed in Ireland -- both with connections to the US gas industry.

The first is the long-delayed 5 Bcm/year Shannon LNG terminal in western Ireland under development by US-based private equity firm New Fortress Energy.

The second is the recently proposed 4 Bcm/year Inisfree floating LNG import facility in the south of the country under development by US LNG company NextDecade.

NextDecade -- founded in 2010 by the late US LNG industry pioneer Kathleen Eisbrenner -- is best known for the planned 27 million mt/year Rio Grande LNG export facility in Texas, which would provide LNG for the Ireland-based FSRU.

The Irish government has welcomed the prospect of LNG imports, which it has said would improve Ireland's gas supply security by providing import route diversity.

The expanding US LNG export sector would act as an obvious future supplier of LNG to Ireland given the relatively short distance between the US and Ireland across the Atlantic.