A case study of the Flex LNG/Rift Oil floating LNG project in Papua New Guinea

Flex LNG Limited is a producer of units for the production, storage and off-take of liquefied natural gas (LNG). It currently has four of these units committed for construction by Samsung Heavy Industries in Korea, utilising the SPB LNG containment system. The world’s first floating liquefaction unit will be delivered to Flex in 2012. Floating LNG facilities have unique potential for monetising uncommitted gas reserves. In June 2008 Flex and Rift PLC entered into a co-operation agreement under which they agreed to work together to develop a floating liquefaction project offshore Papua New Guinea (PNG). The project will utilise Rift’s gas reserves and one of Flex LNG’s floating liquefaction units. Annual production capacity will be 1.5 million tonnes of LNG and start-up is targetted for 2012. The paper will be a case study of this project including: critical path, project structure and contractual matrix, upstream reserves and facilities, feed gas quantity and quality, pipeline issues and, key design parameters and liquefaction operations for the LNG producer. The paper will also cover: direct and indirect stakeholders in the project; economics and financing; PNG-specific issues such as geography, permitting, fiscal regime, local employment opportunities, marine conditions, infrastructure and sovereign risk; LNG demand in the Pacific and LNG marketing and off-take arrangements.