Rystad Energy's Oilfield Service Newsletter: FPSO Market Alive and Making Strides Again

Posted by OilVoice Press - OilVoice


The global floating production market has stirred back to life after enduring a couple years in virtual hibernation during the downturn. Last year brought some relief to the market, with six new FPSO orders worldwide, and with oil prices recovering to around $80 per barrel this year, combined with technological advancements and reduced costs, momentum has picked up further.

More than 30 FPSO projects could reach FID between 2019 and 2021. The cost-cutting efforts of the downturn are a major contributor to the projects favorable economics. Fourteen projects have a breakeven below $50 per barrel, 15 projects come in between $50 and $70 per barrel. Just three of the expected projects have breakevens above $70 per barrel. The pipeline of projects indicate that FPSO awards are set for a strong comeback driven by Brazil.

Despite a stocked pipeline of low-cost projects, FPSO providers are still focusing on innovation and standardization. SBM Offshores Fast4ward concept and BW Offshores Rapidframework program are two interesting examples of the above. Both concepts are designed to reduce complexity and construction time in a typical FPSO schedule. If standardization and innovation could structural reduce time to first oil for floating production solutions, it would further improve economics as fast tracking a project is an effective way to improve project economics.

In the period from 2019 towards 2021, we expect 25 projects to be committed either under a build-operate-transfer model (BOT) or under a lease-and-operate model. For the BOT model, Petrobras is preparing to place five awards under this model, targeting the ageing Marlim fields and the Mero, Buzios and Parque das Baleias developments.

Historically, Petrobras's go-to supplier for FPSOs with processing capacity over 100,000 barrels per day has been either SBM Offshore or MODEC. Hence, for the upcoming FPSO projects in Brazil, SBM Offshore and MODEC are likely to compete for the bigger projects while suppliers such as BW Offshore and Teekay are likely candidates for the smaller projects.

The BOT model is also being applied by ExxonMobil in Guyana on its high-profile Liza Phase 2 FPSO project. Given government approval, SBM Offshore will conduct fabrication, installation, lease and operation of the Liza 2 FPSO for up to two years, after which ExxonMobil will assume ownership. For the Payara field, news has yet break if ExxonMobil will continue to develop its relationship with SBM Offshore with its third FPSO in Guyana. For the opportunities emerging in Asia-Pacific, MISC, Bumi Armada and Yinson are all players with historical strong presence in the region, and likely in good position to compete for contracts.

Rystad EnergyOilfield ServicesFPSOFPSOsFloating ProductionProductionoil price

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