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FPSO Prospects Look Promising for 2020



FPSO Prospects Look Promising for 2020
The global market for Floating Production, Storage and Offloading vessels is headed for a major recovery.

The global market for Floating Production, Storage and Offloading vessels (FPSOs) is headed for a major recovery, with as many as 24 awards expected by 2020 year end. As Audun Martinsen, Rystadt Energy’s Head of Oilfield Services Research states, “offshore operators are finding their footing again after the downturn of 2014, as a robust rise in free cash flow has fuelled a significant uptick in deep water investments.”  The Norwegian consultancy expects the market to grow from around  $19.5 billion in 2019 to $26 billion by 2024, reflecting high demand from Brazil and Mexico, a return to offshore exploration and production and especially, exploration in deep and ultra-deep waters, states a recent Market and Markets 2019 report. “The opportunities are out there,” states Richard Ella, of SBM Offshore.   

77彩票注册官网The world’s first oil FPSO in 1977 was used on the Shell Castellon field in the Spanish Mediterranean and there are now almost 300 FPSOs operating around the world and as of July this year, 32 FPSOs were ready for redeployment to other oilfields.

What are they for?

Thanks to their built-in storage capacity, FPSOs are traditionally used for large-scale deepwater oilfield production where a fixed platform and take-away pipeline infrastructure is either impractical or too expensive. FPSOs are now also increasingly favored for shallow-water fields, due to their lower installation and decommissioning costs and their versatility in comparison to fixed platforms. “With improved economic viability resulting from ongoing standardization 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,” explains Martinsen.

Why South America is leading the pack

77彩票注册官网According to Rystad Energy, South America leads market demand with 12 authorised FPSO projects scheduled by the end of next year. The FPSO boom in South America is mainly the result of large investments in deep-water exploration and field development in Brazil and Mexico. Brazil accounts for more than one-third of the awards for FPSOs in 2019-20 including seven confirmed awards due in 2020 for projects which together represent production of over 700,000 barrels a day of oil and 60 million cubic meters a day of gas. The expansion in Brazil’s offshore production reflects a nascent recovery of the oil industry and greater international interest from exploration companies due to relaxation of local content regulations.  And within the next 24 months, a further twelve orders for FPSOs are shared amongst Asia with four,  Europe and Africa three each and two in Australia.

Advantages

The chief advantage of FPSOs is that when their existing fields are no longer productive they can be moved onwards to new fields. With a large deck area, they have plenty of space for safe and maintainable process facilities and their oil storage capacity makes remote and even smallish fields economically viable.

Challenges

77彩票注册官网Production capacity alongside availability of finance are the two main challenges for both customers and producers of FPSOs. The surge in orders in 2019-2020 may already be straining the supply chain including the major producing shipyards in Asia,  reports a recent report from the United States. Availability of credit and finance is often an issue in big projects and as Ian Cogswell, Cogswell Consulting Ltd. points out,  “there are fewer banks and financial experts familiar with funding FPSO projects than say LNG ones.”  Indeed, familiarity breeds favorability, hence FPSO contractors Yinson and Modec are particularly well-positioned to benefit from this upswing through the next wave of contract awards, according to Rystad Energy’s projections.



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