Despite lower initial capital costs, floating LNG import terminals have higher operating costs than their onshore counterparts and are more vulnerable to harsh weather and oceanic conditions.
Citing Bangladesh’s recent experience, Institute for Energy Economics and Financial Analysis (IEEFA) said that the risks are especially important for countries in South and Southeast Asia, which are highly exposed to increasingly severe natural disasters caused by climate change.
It said in a recent briefing that none of Asia’s largest LNG importers – including mainland China, Japan, South Korea, Taiwan, India, and Thailand – currently have floating import terminals.
It mentioned that almost 90% of the floating import projects in South and Southeast Asia are proposed in countries prone to oceanic disturbances brought on by tropical storms and typhoons, including India, the Philippines, and Vietnam. The case of Bangladesh shows that these storms can have prolonged impacts on energy security.
Recent project cancellations in Bangladesh and the Philippines show that floating terminals may not be so simple to complete, adding to a suite of challenges for rapid LNG demand growth forecasts.
South and Southeast Asia are the largest potential growth markets for liquefied natural gas (LNG) in the coming decades, but LNG infrastructure projects have been notoriously slow. As a result, the industry is promoting floating LNG import terminals as quicker, cheaper options compared to larger onshore configurations.
However, floating import terminals face several overlooked drawbacks that may undermine their uptake in potential growth markets.
For example, while offshore terminals have lower upfront capital costs compared to onshore configurations, their higher operating costs can make them more expensive within just seven years, said the IEEFA.
Additionally, their inability to operate in inclement weather conditions presents a critical risk proposition for South and Southeast Asian markets, which are increasingly exposed to severe weather and oceanic conditions driven by climate change.
“Stronger and more harmful weather events increasingly threaten the reliability of offshore LNG projects and the energy security of importing countries,” said Sam Reynolds, the briefing note’s co-author and LNG/Gas Research Lead for IEEFA Asia.
“Recent cancellations of floating projects in Bangladesh and the Philippines, along with ongoing delays in Vietnam, show that bringing these projects to fruition may not be so simple, potentially curbing industry expectations for rapid, near-term LNG demand growth.”
“It is telling that none of Asia’s largest LNG importers – including Japan, China, South Korea, Taiwan, India, or Thailand – currently employ floating LNG import terminals,” said Christopher Doleman, co-author and an LNG/Gas Specialist for IEEFA.