Recent years have seen a rapid expansion of the world’s FPSO fleet, prompted in part by an increased demand for drilling units that has reduced the number of semisubmersible rigs available for conversion to production platforms. International legislation (introduced largely in response to theExxon Valdez disaster) that phases in requirements for tankers to be fitted with double hulls provides further stimulus to demand since conversion of otherwise obsolete single-hull tankers into FPSOs enables the profitable re-utilization of depreciated assets.
FPSOs dominate the global floating production scene. As of year-end 2006, there have been over 175 FPSO deployments worldwide - 50% more than all the other floating production systems (FPSSs), TLPs, and spars put together.
The reasons for the popularity of FPSOs as host facilities are not difficult to fathom. FPSOs offer large deck areas for processing facilities and plenty of vertical load-bearing capability to resist mooring and riser loads at economical cost and with relatively short lead times, since tankers are produced in large numbers from shipyards worldwide.
FPSOs also have the advantages of allowing more flexible oil distribution and providing storage capacity for produced oil, which can eliminate the need to install pipeline export networks.
This capability is particularly desirable off West Africa, for example, where offshore pipeline infrastructure is very limited and is restricted to shallow waters. Off Brazil, the existing offshore infrastructure is working close to capacity. The extreme water depths of new fields mean that costs of shuttle tanker offtake from FPSOs compares very favorably with the costs of installing additional export pipelines.
Developing the FPS Sector
Initial FPS installations featured converted semisubmersible drilling rigs and in the case of FPSOs, converted tankers. These units tended to be deployed on marginal fields where the water depth and/or uncertainties as to the volume of recoverable reserves meant that development using a conventional fixed platform solution was too commercially risky. The FPS concept has since proved to be a cost-effective method of developing both marginal and world-class offshore fields. Present FPS applications cover a very wide range of offshore developments in all water depths and environments.
Expansion of the world’s floating production fleet has been particularly rapid over the last decade and has been increasingly dominated by FPSOs. Although FPSO numbers continue to grow, future identified prospects show that other vessel types, particularly TLPs and FPSSs, may be increasingly common on new installations.
It is important to note, however, that these are prospects, not forecasts. It is likely that some of the identified prospects will either be delayed or not come to fruition at all.
Future FPS prospects by region
Turning to the prospects for individual regions, the data indicate significant growth is in the cards for the majority of the regional FPS fleets. Western Europe has seen the most FPS deployments to date, but many of its producing areas are now considered mature, and significant new finds are becoming less frequent. Over the 2002-2006 period, only three floating production systems were installed in the region, compared to the 1997-2001 period, during which there were 30 installations.
Between 2007 and 2011, Western Europe FPS installation activity is set to enjoy something of a resurgence, with 13 installations in prospect. The identified prospects for North America indicate potential for a slight increase in installations, with 19 in prospect compared to 17 completed during the 2002-2006 period. Many projects in the US Gulf of Mexico have relatively short lead times, and levels of activity could well exceed the prospects identified here.
There are 124 identified FPS prospects planned and possible for the 2007-2011. Combined, Africa and Latin America account for almost 45% of these prospective installations, with North America and Asia together accounting for another 35%.
Capex forecast
It is important to note that these market forecasts follow the convention whereby the date associated with each floater project relates to the platform’s year of installation. In practice, of course, the contractual payments relating to the FPS units identified are often made in installments, and in most cases are spread over a number of years. For the sake of clarity and transparency, these forecasts do not attempt to reflect this situation. Instead, they focus on indicating the value of the FPS installations that have occurred or will occur in any particular year.
Global FPS capex by vessel type 2002-2011 ($ million)
FPSOs represent by far the largest segment of the market, accounting for 73% of the prospective capex. FPSSs account for a further 16%, while the remaining 10% of expenditure is attributed to TLPs and spars, giving a total FPS capex forecast for the period of over $38 billion.
In terms of order value, there is currently a high level of FPS orders, and this is expected to continue as a series of major developments require high-specification units for delivery during the forecast period.
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. Of the prospective units, around half are expected to be conversions, and another third newbuilds, with the remaining units likely to be redeployments or without a defined development type as yet.
This analysis identifies 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” and/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.
An active leasing market has emerged in the FPSO segment in particular. Roughly 45% of the world’s FPSO fleet - and just over 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, will remain important in meeting the growth in market demand.
The newbuild option gives vessel designers a “blank canvas” in contrast to tanker conversions, and new innovations in vessel design are emerging. Three of the newbuild units under construction have adopted Sevan Marine’s SSP300 design based on a cylindrical hull. These vessels will be installed on the Chestnut and Pilot fields in the UK North Sea and the Piranema field offshore Brazil.
Regional markets
Africa and Latin America account for nearly half of the 124 vessels forecast over the 2007-2011 period (54). Asia is the next most important region in numerical terms (25), followed by North America (19), Western Europe (13), Australasia (12), and the Middle East (1).
In terms of market value, the world’s three major deepwater regions - Africa, North America, and Latin America - account for 67% 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. Thus, although the region has 25 FPS units forecast for the period, its capex at $6 billion is lower than that forecast for North America, which has fewer installations, but where newbuild solutions and/or higher specification vessels tend to be required.
This market forecast is conservative. Activity within the FPS sector over the period to 2011 could well 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.
Regional shares of FPS capex 2007-2011
Further information is available at www.dw-1.com. The authors can be contacted via [email protected]
Authors
Heading DWL’s oil & gas research,Steve Robertson is a graduate in Economics and Computing and lead author of DWL’s current range of ‘The World’ series of market reports including “The World Deepwater Market Forecast,” “The World LNG & GTL Report,” and “The World Floating Production Report.” He is a member of the Institute of Petroleum and the Society for Underwater Technology.
Georgie MacFarlan leads DWL’s publications unit and manages the World Floating Production Database. She is lead author of ‘The World Marine Propulsion Report’ and has been responsible for a wide range of activity within DWL, including extensive work on a number of marine sector global studies.
