Steve Robertson
Georgie MacFarlan
Douglas-Westwood Ltd.
The expansion of the world's floating production fleet has been particularly rapid over the last decade and increasingly dominated by FPSOs. Although FPSO numbers continue to grow, future identified prospects show that other vessel types, particularly TLPs and spars, may be increasingly common among new installations. It is important to note, however, that these are prospects, not forecasts, and it is likely that some of the identified prospects may either be delayed or not come to fruition at all.
Africa, Asia, and North America all show strong numbers of prospective installations for the period to 2008. Activity in Latin America (predominantly off Bra-zil) appears likely to remain constant, while Western Europe shows evidence of a strong decline in activity. Only eight FPS installations are in prospect here for the 2004-2008 period, as opp-osed to the 13 installations recorded in the 1999-2003 period. The region is the only one to register a decline in the number of vessels installed relative to the previous five- year period.
The regional share of the 124 identified FPS prospects planned and possible for the 2004-2008 shows that Africa and Asia combined represent more than 50% of these prospective installations, with North America and Latin America together accounting for another 32%.
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Capex forecast
FPSOs represent by far the largest segment of the floating production market, accounting for 65% of the forecast capex. The remaining expenditure is evenly distributed among the other three FPS types, giving a total FPS capex forecast for the period of $31 billion.
Within the FPSO segment, the exact mix of newbuilds, conversions, and upgrades/redeployments that will be required to meet demand is impossible to determine precisely, though this will obviously have a strong effect on the capex levels within the segment. In our forecasts, we have assumed that the supply mix will include 28 conversions and 19 upgrades/redeployments.
Global FPS capex by vessel type 1999-2008 ($ million). Source: The World Floating Production Report 2004-2008, Douglas-Westwood Ltd.
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In our analysis we have identified four main drivers behind the continued demand growth within the FPS sector:
- Continuing expansion in the use of subsea production technologies
- The industry's move into deepwater areas
- Exploitation of marginal fields
- Growing emphasis on fast-track or phased developments.
On the supply side, the influence of globalization is already apparent, but is likely to be somewhat offset by national insistence on local content in the delivery of floating production systems and other components of offshore developments generally.
An active leasing market has emerged in the FPSO segment in particular – roughly 40% of the world's FPSO fleet, and just under half of the North Sea fleet, is owned by leasing contractors. In recent years, contractors have picked up a number of significant project awards based on the deployment of converted vessels – predominantly tankers and semisubmersible drilling rigs. The redeployment of modified/ upgraded vessels, especially in the leased FPSO segment, is likely to play an increasingly important role in meeting the growth in market demand.
Regional markets
Africa and Asia account for more than half of the 115 vessels forecast for installation over the 2004-2008 period. North America is the next most important region in numerical terms (24), followed by Latin America (16), Australasia (8), and Western Europe (5).
In terms of market value, the world's three major deepwater regions – Africa, North America, and Latin America – account for 72% of forecast global capex. The relatively benign environments and shallow waters in which most of the FPS prospects in Asia are located enable cheaper FPS solutions to be adopted. Although the region has 31 FPS units forecast for the period, its capex ($5.8 billion) is lower than that forecast for North America and not far ahead of Latin America (Brazil) – regions for which newbuild solutions and/or higher specification vessels tend to be required.
We believe that our market forecasts may be slightly conservative and that activity within the FPS sector over the period to 2008 could exceed the levels presented here. There are two main reasons for this. The first of these relates to the potential for new floater projects to emerge as a result of ongoing exploration activities, and the second to the lack of a defined development strategy for some known prospects.
