(EnergyAsia, October 18 2012, Thursday) — Thanks to growing investments in deepwater oil and gas projects, global expenditure in floating production facilities is expected to double to US$91 billion in the 2013-2017 period, with 29% of that taking place in Latin America, said UK upstream consultant Douglas Westwood (DW).
In its latest World Floating Production Market report, DW predicts that oil and gas companies will build a total of 121 floating production units, up 37% from the previous five-year period.
Floating production storage and offloading (FPSO) units will form the largest segment both in numbers (94 installations) and capital expenditure (80%) over the 2013-2017 period. FPSSs account for the second largest segment of Capex (10%), followed by TLPs, then spars.
Latin America accounts for 29% of the forecast installations and 37% of the projected capital expenditure. Most installations to date have been in Petrobras-operated fields off Brazil and this is likely to continue, albeit substantial delays are expected for Petrobras’ offshore E&P investment.
Asia is the next most important region in numerical terms (24), but Africa is so in terms of forecast capex (US$18.2 billion).
DW said the growth will be driven by newbuilds and conversions, the emphasis on local content resulting in increased costs and general offshore industry cost inflation.
The report’s author, Hannah Lewendon, said:
“Floating production is firmly established as a cost-effective method of developing oil and gas fields around the world. In water depths beyond 500-metre floating production systems becomes one of the few options open to operators, an increasingly important factor as production moves into these areas. DW forecast that 63% of global FPS market spend will be in deep waters.
“Latin America accounts for 29% of the 121 installations forecast and 37% of the projected Capex. Most installations to date have been in Petrobras-operated fields off Brazil and this trend is likely to continue, although substantial delays are expected for Petrobras’ offshore E&P investment. Asia, then Africa and Western Europe make up much of the remaining forecast Capex.
“FPSOs represent by far the largest segment of the market both in numbers (94 installations) and forecast Capex (80%) over the 2013-2017 period. FPSSs account for the second largest segment of Capex, followed by TLPs, then spars.”
Steve Robertson, DW’s director, said: “Overall, the outlook is considered positive and the value of annual installations is projected to grow from US$10.2 billion in 2013 to US$26.2 billion in 2017.
“Three main factors will affect the supply of units in the FPS sector; financing, local content and leasing. The FPSO leasing sector remains weak with 85% utilisation at present compared to 89% at the time of the 2011 edition of the report. Contractors are reporting poor returns on existing projects and write-downs on new projects due to cost over-runs.
“Financing remains a challenge for leasing contractors and smaller E&P companies as a result of the debt crisis in Europe. At the same time local content requirements are pushing up prices and extending lead times, particularly in Brazil.”