Floating liquified natural gas ( LNG ) import terminals – often promoted as a quicker, cheaper option to larger onshore facilities – face several overlooked drawbacks that may undermine their uptake in South and Southeast Asia, regions expected to be the largest LNG growth markets over the next two decades, according to a recent report.

For example, while offshore terminals have lower upfront capital costs compared with onshore configurations, their higher operating costs can make them more expensive within just seven years, according to a briefing report from the Institute for Energy Economics and Financial Analysis ( IEEFA ).

Additionally, their inability to operate in inclement weather conditions, the report notes, 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.

Floating LNG import vessels – including floating storage and regasification units and floating storage units – may face operational issues at wind speeds classified as “moderate breezes” on international wind scales, the IEEFA’s analysis finds. Moderate to rough wave conditions can also inhibit operations and force floating terminals to temporarily relocate.

Interruptions are often brief, but Bangladesh’s recent experience, the report highlights, demonstrates that weather-related operational challenges can have prolonged impacts on fuel supply, foreshadowing energy security risks for other countries building offshore LNG import projects.

One of Bangladesh’s two floating LNG import facilities, the Summit LNG terminal, was offline for nearly six months through September 2024. After undergoing routine repairs from January to March, the report details, the terminal sustained structural damage during Cyclone Remal in May and was sent to Singapore for further repairs. Upon its return to Bangladesh in July, challenging oceanic conditions then hindered the reconnection process, delaying the terminal’s restart to September.

The storm reportedly cost Bangladesh US$600 million in economic losses and damage, in addition to the US$22 million demanded by the Summit LNG Terminal Company – partly owned by Japan’s JERA ( 16.5% ) and Mitsubishi ( 25% ) – for contractual payments while the terminal was offline.

Throughout Asia, 122 LNG terminals are under development, 22 of which are floating configurations. Nearly 90% of the floating projects planned in South and Southeast Asia are in countries prone to tropical storms and typhoons/cyclones, including India, the Philippines and Vietnam.

New terminals in the Philippines have already faced weather-related operational challenges, while unfavourable conditions along Vietnam’s coast challenge the applicability of floating import configurations.

Key findings from the report include:

• 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 with larger onshore configurations.
• Despite lower initial capital costs, floating import terminals have higher operating costs than their onshore counterparts and are more vulnerable to harsh weather and oceanic conditions. These risks are especially important for countries in South and Southeast Asia, which are highly exposed to increasingly severe natural disasters caused by climate change.
• None of Asia’s largest LNG importers – including mainland China, Japan, South Korea, Taiwan, India and Thailand – currently have floating import terminals.
• 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.

“Stronger and more harmful weather events increasingly threaten the reliability of offshore LNG projects and the energy security of importing countries,” says Sam Reynolds, the report’s co-author and LNG/gas research lead for IEEFA Asia.

Christopher Doleman, co-author and an IEEFA’s LNG/gas specialist, adds: “While weather-related risks may not be insurmountable for participants in the maritime natural gas trade, efforts to manage them will add costs and complications to an already expensive fuel for emerging markets.”