A total of 33 more contracts for floating production, storage and offloading vessels and floating liquefied natural gas units could be awarded between now and the end of the decade, with Brazil and West Africa continuing to dominate the market, according to a Clarksons report.
The total value of FPSO orders - including FLNG units - that could potentially come by the end of 2020 is $25 billion as higher oil prices, cost deflation and increased standardisation leads a charge in the sector, the report from London-headquartered analysis company Clarksons Research said.
Of the 33, six more are seen being awarded this year, with 13 in 2019 and 14 in 2020, Clarksons said.
There is also scope for an additional five contracts for semi-submersibles and six contracts for jack-up production units, the report read.
The potential boon comes off the back of a rebound in the floater market, where eight awards totalling $6.5 billion were made last year, following zero awards in 2016 - the first barren year since 1985, Clarksons’ latest report on mobile offshore production units showed.
“Many of the FPSO contracts placed in the last 18 months have been for projects delayed since the start of the offshore downturn and so in a sense were ‘low hanging fruit’,” the report read.
“But more granular trends have been significant too, like project cost deflation and synergies from standardisation (e.g. at Johan Castberg), the improved situation at Petrobras (reflected in the Sepia and Mero-1 FPSO awards) and renewed interest in FLNG.
This year has already seen five floater awards, with Chinese yards involved in all of the orders, whether in terms of full construction or just the hull, Clarksons said.
Those awards included Shell’s FPSO for the Penguins development off the UK, going to Fluor and China’s Offshore Oil Engineering Company (COOEC); the Mero-1 FPSO for Petrobras, handed to Japan’s Modec and compatriots; and the Hai Yang Shi You 119 FPSO for CNOOC Ltd’s Liuhua 16-2 field off China, handed by China's Offshore Oil Engineering Company (COOEC) to .
Also, Greece’s Energean handed a contract to Sembcorp Marine for the FPSO for the Karish gas field development off Israel, with the hull sub-contracted to Chinese yard Cosco Shipping Heavy Industry.
Also in the five was Modec’s award for conversion of a VLCC hull at Cosco’s Dalian facility into the Carioca FPSO for Petrobras’ Sepia field off Brazil. Keppel Offshore & Marine has recently won the deal for the topsides.
Of the 33 further potential awards from now until the end of the decade, 76% would be FPSOs and 24% FLNGs. In terms of the potential $25 billion deal value, FPSOs make up 56% of the total, with FLNGs on 44%, data from Clarksons showed.
In terms of the number of potential awards, Latin America (dominated by Brazil) could get 10 units, including phased development of the Mero (ex-Libra) and Buzios fields, while West Africa is set for eight.
Clarksons Research managing director Steve Gordon and the report’s author Karl Williams told Upstream that the likes of Ghana, Mauritania, Senegal and possibly Ivory Coast have order potential, along with the mainstay of Nigeria. Angola is, however, more behind the curve in terms of development before the end of the decade.
One unit set to be ordered will be by BP and Kosmos Energy for the Tortue-Ahmeyim gas field development straddling the maritime boundary between Mauritania and Senegal. BP said this week it sees a final investment decision on phase one before the end of this year.
Others include Eni’s Amoca early production system off Mexico, Premier Oil’s Sea Lion development off the Falkland Islands, an FPSO for CNOOC Ltd at its Enping 15/1 cluster off China, and an FPSO for Chevron at Rosebank off the UK (with an award expected in the fourth quarter).
Apart from Tortue, seven other FLNG orders are seen within the 33 potentials, including near-shore shale gas liquefaction facilities in the US Gulf of Mexico, such as the Main Pass Energy Hub.
Gordon and Williams said the number includes the two FPSO awards already dished out to SBM Offshore by ExxonMobil at its prolific Stabroek block off Guyana, and a third there, which is seen being awarded by the end of 2020. ExxonMobil recently upped the estimated discovered recoverable resource base on the block to at least 4 billion barrels of oil, with scope for at least five FPSOs in a phased development.
Not in the numbers is a possible second FLNG for Coral off Mozambique, which could come in 2020 or 2021.
Although the floater market is looking on the up, Clarksons did warn of potential threats to a future contracting increase.
“Risks and uncertainties remain: oil price volatility, US shale E&P spending, project financing challenges and the unsure outlook for Opec policy are all relevant factors to bear in mind,” the report read.
“But on the whole, the outlook to 2020 for FPSO contracting now appears more encouraging.”