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OE17: A viable FPS future?

Written by  Ben Wilby, Westwood Energy Thursday, 07 September 2017 00:21

The floating production systems (FPS) market has been heavily impacted by the oil price downturn. Orders declined significantly from 17 in 2014 to four in 2015 and zero in 2016.

There have been signs of a recovery in 2017, with seven orders booked year to date. However, a return to the order values seen during the last cycle appears unlikely for the foreseeable future. Despite this, Westwood remains confident that the FPS sector will continue to play a significant role, remaining a crucial component of deepwater and marginal field development. 

Overall, Westwood expects that the value of units installed over 2017-2021 will reach US$57 billion, driven by units that were ordered in 2012-2014. The lack of new orders in 2015-2016 will not affect installation Capex (capital expenditure) until 2018, owing to typical 2-5-year project lead times.

However, following this influx, a lean period for the FPS industry is expected, due to the current lack of orders, from 2018, and phased expenditure will bottom out in 2019. Post-2019, Westwood expects to see an improvement in the market, albeit with phased expenditure at the end of the forecast still expected to be lower than at any point over the last 10 years. Highlighting this, 2017 and 2018 installation will represent 64% of the total value of units installed over the forecast. 

FPS expected to be installed in 2017-2018 include some of the most expensive units ever installed, such as the two units for Inpex’s Ichthys field offshore Australia, which will total some $4.7 billion, the Stella FPSS (which began production in February), and Dana Petroleum’s cylindrical FPSO for the Western Isles development. 

The UK will see one of the strongest periods of installation expenditure, with total expenditure over 2017-2021 forecast at 141% greater than 2012-2016, as a range of units initially expected to come onstream 2015-2016 are brought onstream.

2017 startups include BP’s Quad 204 development (onstream in May) and Premier Oil’s Greater Catcher project. Whilst there is expected to be a significant decline in expenditure following the installation of these units, the revival of the Rosebank project and Shell’s Penguin redevelopment, which is moving towards sanctioning, indicate that the UK offshore sector will continue to remain a viable market for future FPS deployments.

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