Floating production to reach $130B

Energy Maritime Associates (EMA) predicts US$130 billion will be spent on floating production units by 2018.

A report by the Society of Petroleum Engineers said that continued expansion in the use of subsea production technologies, coupled with the industry’s move into deepwater areas is driving the demand for floating production units. The world regions with the most floating production systems (FPS) on order are Brazil, Africa, the Gulf of Mexico, northern Europe and Southeast Asia.

The EMA estimates between 128-199 FPS's are expected to be ordered over the next five years, with a total capital cost between US$105.9-$158.3 billion. The most likely forecast is 157 orders costing $129.8 billion. FPSOs account for almost half of the expected orders, and 65% of the capital expenditure. 15% of capex will go to FLNG units, 7% to production semis, and the remainder evenly spread among FSOs, FSRUs, spars, and TLPs.

Last year, $20 billion worth of contracts was awarded for floating production units, and 28 units were delivered. The deep and ultra-deepwater oil focused developments in Africa and Latin America combined with the, generally, shallow water, gas-focused developments in Australasia are expected to account for almost 59% of total floating production storage capex up to 2017.

A recent report by Bloomberg showed that SBM Offshore, Japan’s Modec, and BW Offshore are competing for FPSO contracts from Brazil-based Petrobras. The firm is the world’s biggest ultra-deepwater producer, with 32% of the order backlog for FPSs projected for use offshore Brazil.

Norway-based BW Offshore recently signed a letter of intent to acquire 30% of the Polvo oil field, located in the Campos basin in Brazil. The firm owns and operates the FPSO Polvo, operating under a firm contract until 3Q 2014, with additional options until 3Q 2022. Polvo has a fluid processing capacity of 150,000bbls/d, an oil processing capacity of 90,000bbl/d, and 1.6MMbbl/o capacity.

In 2012, 71% of Africa’s capex was directed primarily towards West Africa, focused on FPS developments in Angola and Nigeria. France-based Total projects it will have 11 floating production units in operation offshore West Africa by the year 2017. Included in Total's estimated roundup of FPSs is the Dalia FPSO (pictured), currently operating in the Dalia field offshore Angola. Dalia is capable of processing 240,000bbl/d, and has a storage capacity of 2MMbo.

According to the EMA’s Floating Production Outlook Report, there are currently 264 units currently in operation, and 73 units on order. The Group forecasts between 125 and 185 contracts to be issued for floating production units by 2018, and of those, FPSOs will become the preferred choice for most fields.

“While the pace of floating production system orders has been slower than expected, over $20 billion in contracts were still awarded last year,” EMA’s Managing Director David Boggs said. “The order book had been increasing steadily since 2010, peaking at 71 units in mid-2013. Since then it has declined almost 10% to 64 units. Today’s average order requires significantly higher financial, engineering, and project management resources than in the past, pushing up the per unit cost. This is reflected in our analysis of EPC and leasing contractors – some with multiple contracts and others with idle capacity.”

Read more on FPS spending:

138% increase in FPSO spending

Floating production: US$11 billion on order

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