Floating LNG terminals threaten safety in Asia's storm-prone regions

Countries like India, the Philippines, and Vietnam are proposing about 90 percent of floating liquefied natural gas (LNG) projects in regions susceptible to oceanic disturbances caused by tropical storms and typhoons. A report from the Institute for Energy Economics and Financial Analysis (IEEFA) indicates that despite being marketed as a faster and cheaper energy solution, these floating LNG terminals entail higher cost and climate risks to Asian markets. Over the last few years, there have been notable cancellations and delays of floating projects in Bangladesh, the Philippines, and Vietnam. These incidents reflect a growing concern regarding the reliability of offshore LNG projects, raising red flags for the energy security of these importing nations. The challenges posed by extreme weather events on these floating LNG terminals are significant. The creation of floating storage and regasification units (FSRUs) is often seen as an economically viable option, with initial construction costs potentially under $100 million. However, ongoing operational costs, including daily charter rates for specialised vessels, can reach from $80,000 to $120,000. The financial burden can increase drastically, as exemplified by a recently terminated FSRU project in Bangladesh which was set to cost $300,000 per day. The scenario is exacerbated by the geopolitical factors that have inflated LNG prices, such as Russia’s invasion of Ukraine in 2022. According to the report, reliance on FSRUs may lead to unreliable energy sources, as these units do not withstand harsh metocean conditions effectively. This could further discourage the larger LNG importers in Asia, including China, Japan, and South Korea, from adopting FSRUs altogether. China suspended its FSRUs in 2016 due to high costs, emphasizing that industry leaders are wary of depending on technologies that may falter in adverse weather. Consequently, high LNG prices could force countries like Bangladesh and Vietnam back to coal, a readily available and familiar energy source. The forecast from Wood Mackenzie indicates that the demand for LNG in Asia is projected to double by 2050, which puts immense pressure on these countries to find a reliable and cost-effective solution. If U.S. LNG export approvals to non-free trade agreement countries resume, it would be instrumental in meeting the predicted demand growth. However, if these approvals remain suspended, Asian countries risk falling behind in their LNG development, potentially impeding their plans to transition to gas-fired power.