FPSO Industry Takes Off: Rystad
Floating production, storage and offloading vessels (FPSOs) is headed for a major renaissance with as many as 24 FPSO awards expected by 2020, driven to a great degree by Brazil, according to research by Norwegian analysts Rystad. And while the present surge is for oil projects, there is an uptick in interest in LNG projects too, the report's author Audun Martinsen told NGW August 13.
South America leads the pack with 12 sanctioned FPSO projects planned by the end of next year, followed by Asia with four, Europe and Africa with three each, and two more in Australia.
Brazil – currently witnessing an influx of international E&P companies – is set to award seven more FPSO awards in 2020, thereby bringing the country’s tally to more than one-third of the awards anticipated globally in 2019 and 2020.
The seven projects already confirmed this year collectively represent production capacities of over 700,000 barrels/day of oil and around 60mn m³/day of gas.
“The ongoing upswing in newly sanctioned FPSO projects points to a brighter future for the FPSO market. Offshore operators are finding their footing again after the downturn of 2014, as a robust rise in free cash flow has fueled a significant uptick in deepwater investments,” said Martinsen, Rystad's head of oilfield services research.
The FPSO boom in South America is mainly the result of large investments in deepwater exploration and field development. Another important factor has been Brazil’s recent relaxation of local content regulations, which has attracted new international players to the table.
"With improved economic viability resulting from ongoing standardisation measures, coupled with growing deepwater investments, FPSOs are likely to continue to emerge as an attractive development option for many fields in all corners of the world, in both deep and shallow water,” Martinsen added.
The FPSO contractors Yinson and Modec are particularly well-positioned to benefit from this upswing through the next wave of contract awards, according to Rystad.
Martinsen told NGW that with time, FPSOs for gas, and FLNG, will take a bigger share of the cake, as the rate of sanctions rises from one every six years to one every two years as costs fall. Eni's Coral LNG off Mozambique and BP's Tortue LNG off Senegal/Mauretania are at various stages of the construction process, while Shell's Prelude project and Inpex' Ichthys are both operational, proving the concept. Gas for the Browse LNG project is also expected to be produced from FPSOs moored above the Calliance and Brecknock fields.
But these projects will need operators with deep pockets. Financing can be difficult if the shareholding structure is complicated, as Ophir found out with its failure to find backers for Fortuna LNG. The economics of the project were not the problem and the government is keen to find another developer, NGW understands. The licence for that block might be reawarded to another operator, with first gas later next decade.