Asian Countries Face Higher Costs and Weather Risks with Floating LNG Terminals
Research from IEEFA reveals that 90 percent of proposed floating import projects in South and Southeast Asia are located in countries vulnerable to oceanic disturbances. Despite the promise of floating liquefied natural gas (LNG) terminals as a faster and cheaper energy transition solution, a recent study by a think tank shows that these projects come with higher costs and climate risks, especially for Asian markets.
The report co-author and LNG/gas research lead for IEEFA Asia, Sam Reynolds, highlighted the increasing threat of severe weather events to the reliability of offshore LNG projects and the energy security of importing countries. Recent cancellations and delays in floating LNG projects in countries like Bangladesh, the Philippines, and Vietnam indicate potential challenges in bringing these projects to fruition, affecting industry expectations for rapid LNG demand growth.
The study points out that most of the floating import projects in South and Southeast Asia are proposed in countries prone to oceanic disturbances caused by tropical storms and typhoons. While floating LNG terminals offer cost advantages compared to onshore terminals, the charter rates for specialized vessels required for these projects can be significant, ranging from US$80,000 to US$120,000 per day.
Russia’s invasion of Ukraine in 2022 further exacerbated the costs associated with floating LNG projects. The World Bank also highlighted the limitations of floating storage regasification units (FSRUs) in harsh metocean conditions, which can result in low availability and increased costs due to dredging or breakwater requirements.
IEEFA pointed out that none of Asia’s largest LNG importers currently utilize FSRUs due to the risks and costs involved. The study emphasized the need for more U.S. LNG to curb coal use in Asia, with forecasts indicating a significant growth in LNG demand in the region over the coming decades.
The Wood Mackenzie study commissioned by the Asia Natural Gas and Energy Association (ANGEA) modeled different scenarios, showing the potential impact of lifting or maintaining the suspension on U.S. LNG export approvals. The study highlighted the importance of affordable LNG supply for countries looking to transition to gas-fired power and reduce coal consumption.
