Over the next couple of decades, natural gas is expected to be the fastest-growing major fuel. Not only is it cheap and abundant in North America, but it's also less harmful for the environment, producing significantly fewer greenhouse gas emissions than coal or crude oil.

Given natural gas' numerous advantages over other fuels, several companies are investing heavily in the facilities and infrastructure required to produce, store, and transport the material. While gas can easily be transported within the U.S. through a vast network of pipelines, international shipping is much trickier, since it requires gas to be converted from its natural state into a portable liquefied form.

By cooling natural gas to -162°C (-260°F), companies can produce liquefied natural gas, or LNG -- a clear, colorless liquid that has 600 times less volume than natural gas. LNG can then be shipped via tanker to markets all over the world, where it is converted back into natural gas at regasification facilities and transported to homes, businesses, and other users.

However, LNG is almost exclusively produced in plants that are based on land, which makes it difficult to convert gas produced from offshore and remote locations into liquid form. But one company has developed a new technology that can overcome this obstacle by processing gas directly from remote offshore locations around the world. Let's take a closer look.

Shell's Prelude floating LNG facility
Shell (RDS.A) is building the Prelude floating LNG facility, a massive structure that will be 1,600 feet long and 240 feet wide once completed, with a deck as large as seven football fields. Once finished, it will likely be the world's largest floating LNG facility, capable of producing 3.6 million tons of gas annually. For perspective, that's enough gas per year to supply the entire city of Hong Kong.

Once completed, the Prelude facility will be moored in a remote basin located roughly 300 miles northeast of Broome in western Australia, where it will remain for about 25 years, even during extreme weather events such as cyclones, which it has been designed to withstand. According to Shell, Prelude has many advantages over land-based LNG facilities.

By allowing the company to produce gas from remote locations at sea, liquefy it, and then deliver it directly to ships for transport to end-users, Prelude will allow Shell to develop remote gas fields that could not otherwise be developed. Also, unlike land-based LNG facilities, floating facilities don't require pipelines or port facilities. As a result, Shell expects floating facilities like Prelude to be 30%-50% cheaper to build than land-based plants, though they are expected to be more costly to operate.

Shell's peers catch on
Other Big Oil companies have taken note and are moving to develop similar floating LNG facilities. ExxonMobil (XOM 0.23%) and BHP Billiton (BHP -3.43%), for instance, intend to construct what would be the world's largest floating LNG facility to develop the Scarborough gas field off the northwest coast of Australia.

According to Exxon, the Scarborough floating LNG plant would begin production in 2020-2021 and would have a capacity roughly double that of Shell's Prelude facility. It would be able to process roughly 1.1 billion cubic feet of gas per day, producing between 6 million-7 million tons of LNG per year from five trains. The two companies expect to reach a final investment decision on the project by next year or 2015.

Will Shell's ambitious project pay off?
While Shell is highly optimistic about Prelude, it remains unclear just how profitable the venture will be. Though Prelude's operating costs will be considerably higher than land-based facilities, that should be offset by lower up-front capital costs over the life of the project, according to statements made by Andrew Smith, Shell's country chair in Australia, to a Parliamentary inquiry committee in Perth.

Still, doubts remain as to the true profitability of floating facilities like Prelude over land-based options. Citing estimates from an unnamed source, the inquiry committee revealed that rates of return for floating versus land-based options for the Browse LNG project, which will involve development of three gas fields located off the coast of Western Australia, differed by just 1%. As with most untested technologies, we'll just have to wait to see whether Prelude will pay off.