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In August 2021, PETRONAS issued a tender for a third floating
liquified natural gas (FLNG) vessel, to be named PFLNG Tiga (PFLNG
3). Initially, there was some confusion about where this vessel
would be located but it has become clear that it will be used to
solve some of the challenges in commercialising gas offshore Sabah,
Malaysia.
Why offshore Sabah?
In terms of oil and gas investment, the Malaysian state of Sabah
has always played second fiddle to Sarawak, where the industry has
been built up around the export of LNG through the MLNG complex in
Bintulu, with the gas coming from a large number of offshore
fields.
Though long recognised for the development of its deepwater oil,
Sabah has proven itself to be equally prospective for gas, with
several significant discoveries being made in the past three
decades. However, the development of these discovered gas resources
has been stymied by a lack of commercialisation options, with the
existing processing facilities (Labuan and SBGAST) providing
limited capacity and domestic gas demand unable to support the
development of key offshore discoveries, including the Kebabangan
cluster.
To counter this, the Sabah-Sarawak Integrated Oil and Gas
Project was conceived by PETRONAS. This would link the gas fields
in Sabah to the MLNG complex in Sarawak and was composed of two
main elements:
The Sabah Oil and Gas Terminal (SOGT): the
terminal has a capacity to handle 300,000 barrels per day (bbl/d)
of oil and 1.25 billion cubic feet (Bcf) of gas a day. The terminal
started operations in December 2013.
The Sabah-Sarawak Gas Pipeline (SSGP): this
pipeline runs from the SOGT to the MLNG complex. The pipeline is
512km long and takes an onshore route to the east of Brunei. The
pipeline is 36-inch in diameter, and has a design capacity of 750
million cubic feet of gas per day (MMcf/d), or enough gas to
provide feedstock for about 5 million tonnes per annum (mtpa) of
LNG. The pipeline was commissioned in January 2014.
If all had gone to plan, then we would not be looking at a third
PFLNG vessel. However, the SSGP has been beset with issues
including leaks and explosions, with the first in June 2014 and the
most recent in January 2020. This has seen the pipeline shutdown
for extended periods for repairs and testing and it has been
offstream since January 2020. As a result, gas volumes exported
from Sabah to Sarawak have been far below plan and, in-turn, this
has limited the production rates at the upstream fields in Sabah,
whilst also decreasing the feedstock for the MLNG plant.
The Kebabangan cluster and PFLNG Satu
The Kebabangan cluster was the largest of the new project
developments to take FID on the basis that the gas could be sent to
the MLNG complex for export. The Kebabangan development came
onstream in November 2014, with the field expected to export gas at
a rate of 750 MMcf/d, with both the gas and liquids exported to
SOGT through separate pipelines, with the gas then sent to MLNG
through the SSGP.
The PFLNG Satu (PFLNG 1) vessel has a nameplate capacity to
produce 1.2 mtpa of LNG and became the first FLNG vessel to ship a
cargo in April 2017. The vessel was located at the Kanowit field,
which already had an existing gas pipeline linking it to MLNG. This
application allowed the vessel to be tested, whilst any teething
problems would not see the field shut in.
Given the SSGP issues, a decision was made to move the PFLNG
Satu vessel to the Kebabangan field and, in May 2019, the vessel
received its first gas from Kebabangan. Whilst this was a good and
innovative solution, it was far from ideal for the Kebabangan
partners as the capacity of PFLNG Satu is only about 20-25% of the
SSGP, thus continuing to limit the production from the field.
So, how can the problem be solved and where does PFLNG Tiga
fit?
By far, the best solution would be for the SSGP issues to be
fully resolved and for the pipeline to reliably come back onstream
at full capacity. PETRONAS is targeting for the pipeline to be back
onstream by January 2023. However, there is significant uncertainty
on this timeline and, even if it does come onstream, whether the
pipeline will be able to reliably operate anywhere close to its
design capacity.
Another option, and one that has been long discussed, would be
for a dedicated LNG liquefaction plant to be built in Sabah.
However, this would require at least 20 years of feedstock to
justify and would also be a tacit admittance that the SSGP will
never come back onstream.
This is where PFLNG Tiga comes in, as it provides a flexible
solution and optionality based on the future of the SSGP and the
Kebabangan field. The vessel is reported to have an export capacity
of 2 mtpa of LNG and it is understood that the vessel will likely
be located close to SOGT. When combined with PFLNG Satu, this would
provide a total export capacity of 3.2 mtpa, still well below the
planned production rates for Kebabangan.
However, this solution provides a huge amount of flexibility
that covers various future scenarios of the SSGP. The chart below
shows the potential build up of production from Kebabangan based on
these different solutions, with the assumption that the SSGP will
be limited to 50% of its nameplate capacity of 750 MMcf/d.
What about PFLNG Dua?
The PFLNG Dua (PFLNG 2) FLNG vessel provides the market access
for fields in Block H, that is remote from the existing Sabah gas
pipeline infrastructure. Given this, an FLNG vessel was a logical
concept to consider and eventually select for the deepwater gas
fields.
The development was brought onstream in February 2021 and, if
all goes as planned, then the Block H fields will continue to
supply PFLNG Dua at around its export capacity and undeveloped
fields in the block will be brought onstream to maintain production
at this rate.
What does this mean for upstream investment in Sabah?
Upstream investors have significant concerns about the gas
commercialisation in Sabah. This has limited their desire to invest
in exploration, unless it is oil focused. Whilst PFLNG Tiga should
provide a reliable commercialisation option that will also give
PETRONAS flexibility to adapt to the potential future reliability
of the SSGP, it would seem almost the entire capacity of PFLNG Tiga
would be utilised by the Kebabangan field, leaving little room for
other players.
If the SSGP was to reliably come back onstream, then PETRONAS
could consider relocating either PFLNG Satu or PFLNG Tiga to
commercialise other gas fields in Sabah or Sarawak.
Will this be enough to bring upstream investors back to
exploring for gas in Sabah? I'd say that for now at least, they
will be watching with interest, but not moving or spending.
What about the impact on MLNG?
In January 2017, MLNG train 9 came onstream, increasing the
total capacity of the MLNG complex to approximately 30 mtpa.
However, output increases have not followed, with the lack of
supply from Sabah being one of the key contributing factors. The
MLNG partners will be keen to improve utilisation and a number of
gas fields in Sarawak are being developed to this end. Once this
supply comes onstream, the opportunity for Sabah gas to be
commercialised as feedstock at MLNG would reduce, creating a
further constraint on Sabah gas production.
Posted 08 October 2021 by Robert Chambers, Director, Upstream Research, IHS Markit
