Misui OSK Lines (MOL) has signed a preliminary agreement to deploy a floating liquefied natural gas (LNG) unit in Hong Kong and supply two of the city-state's largest electric generation plants.

MOL, which owns one of the world's largest floating LNG carrier fleets, has agreed to deploy the 263,000 cubic meter capacity floating storage and regasification unit (FSRU) Challenger, which was built last year in South Korea.

MOL will supply the gas for the Hong Kong Offshore LNG Terminal project slated for the southern waters of Hong Kong east of the Soko Islands. The offshore facility is expected to begin operations around the end of 2020.

Two destinations are targeted for the FSRU deliveries -- the 2,500 MW combined-cycle Black Point Power Station, Hong Kong's first gas-fired facility located at New Territories, and the 3,237 MW Lamma Power Station located at Lamma Island, with most units coal-fired, but 890 MW of gas-fired capacity, too. There are more than 200 islands included in Hong Kong's territory.

The LNG project is in support of the Hong Kong Special Administrative Regional government's initiative to generate about half of the city-state's electricity from natural gas by 2020 as a means of improving air quality and general environmental conditions. Gas has recently accounted for about 20% of the power supplies, and coal is being phased out in favor of more gas under a government decree.

"Planning for the offshore terminal is progressing at a good pace and the environmental impact assessment study for the project has been submitted to the government," a MOL spokesperson said. "Discussions are ongoing to develop and reach a definitive agreement for the supply of FSRU that will assist in improving the long-term energy security for Hong Kong, as well as providing access to competitive gas supply from world markets."

MOL's FSRU, reportedly the world's largest, was built by Daewood Shipbuilding in South Korea and is currently operating a short-term charter for a project in Turkey.

Deploying FSRU technology in Hong Kong seems like a natural, officials said, considering the limited availability of land for an onshore terminal, shorter construction time, lower capital requirements and reduced environmental impacts, compared to an onshore facility.

Earlier this month, MOL CEO Junichiro Ikeda announced that the company took delivery of a new LNG carrier, CESI Lianyungang, developed on a joint venture with China COSCO Shipping Corp. Ltd and China Petroleum & Chemical Corp. for an offshore LNG project in China.