Black & Veatch's Haberberger offers update on floating liquefaction landscape

When Golar LNG's Hilli Episeyo began operations recently off the coast of Cameroon, it became the world’s first converted Floating Liquefaction (FLNG) vessel to go into production. Black & Veatch led the effort to convert the Hilli Episeyo and SmartBrief caught up with the company's Kyle Haberberger following his presentation at the recent World Gas Conference in Washington, DC, to hear more of his insights about what the milestone means for the industry.

You talked during your presentation about how the Hilli Episeyo is a game changer for the industry. Why?

It is an entirely new concept. Not only because it is floating, but also because it is the mid-scale size. We saw a lot of the large-scale baseload LNG projects have a lot of cost overruns and schedule overruns due to their shear bulk in size. Now people can see we are doing these floating LNG projects that are a little bit smaller, have a lot more manageable off-take capacity, easier financial agreements with only one or two players involved. I really think that is the direction the industry could move going forward. And just in general, everyone has been waiting on floating. Now that it’s proven and it’s easier to get financing, people can realize that at almost any location we can provide a cheaper solution with floating than we can with a base-load terminal. In a lot of remote locations, floating really seems like the way to go.

How do you go about changing the industry perception that bigger is better?

We have to just keep being part of the conversation with those big companies that are used to base-load and try to change their perception. When we have clients in, we tell them what we can produce and at what cost. A lot of times we have to go through a full field study before they believe us that we can do it on a ship. But we can and we’ve proven that there is a market where we can provide a lot of value.

‘Bigger is better’ has always been the thought, but that might not actually be the case for how the market is moving in the future.

Do you see the marketplace going in the direction of more conversions or more new builds?

There are benefits to both. There is a surplus of carriers that are starting to reach 30 years old or more, so a conversion can be extremely appealing on a schedule and cost basis. There definitely are some limitations though. You might not be able to fit quite as large of a train as you want to. You might have some equipment limitations due to how you have to fit the conversion in. But if those aren't necessarily your driver, like if you are OK with maybe having 4 trains instead of 3 trains or if you are OK with not being perfectly optimized, but you are able complete the project a year faster and a lot cheaper, then that’s the right answer. It is project-by-project, but with the ships that are going to be coming available – and especially companies like Golar who own ships and just re-purposed one that was running out of its service life - then a conversion can be pretty appealing.

For ships of similar capacity, what is the cost difference between a new build and a conversion?

It is highly dependent on who you buy the ship from. Golar already owned the ship, so it was way cheaper for them to do a conversion. If you go out and try to buy an existing ship that is in pretty good shape, you might not find a huge savings. But a conversion can save costs if you have a partnership with someone who already has ships and wants to use them and is going to give you a good price on them. It just all depends on who you are and where you are in the space.

We’ve looked at both new builds and conversions and it just depends on how you acquire the old ship and who is financing them. A conversion can be as expensive as a new build if someone is going to charge you top dollar for an old ship because they know some ships aren’t just going to be used as conversions. A lot of people are proposing now to build an on-shore liquefaction plant and just pull up an old ship for storage and not build an on-shore tank.

There is actually all the sudden this demand for old carriers, which is kind of weird. The price of them has been driven up. It can be difficult to acquire them even though there are a lot on the market.

You talked about the benefits of FLNG in remote locations. Can you weatherize a converted ship for operation in colder climates?

You can absolutely do that, it just depends on how cold it is. Originally, when we were going through the Hilli design, it was designed to go through anywhere that got down to minus-20 Celsius. Pretty chilly. You just need a little extra heat tracing and to make sure your equipment design correctly; probably different coatings on the metals. At the end of the day, we put on-shore plants in cold areas and what you have to do to make an off-shore facility ready for cold weather is no different then what you have to do to make an on-shore facility ready for cold weather. There is no added complexity because you are floating.

Editor's note: This interview was edited for clarity and length.