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Clouds on the FPSO horizon

By  Monday, 15 June 2015 07:02
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Bittersweet phase for the floating production, storage and offloading (FPSO) market through to 2019, say analysts.

While the FPSO Network notes that despite volatile oil prices the global FPSO market could attract US$80-$120 billion of investment, Douglas-Westwood points to a declining sector.

According to the firm’s report World Floating Production Market Forecast 2015-2019, although about $81 billion will be spent on floating production deployment, an increase of 73% compared to 2010-2014, orders will decline.

The value of annual installations is projected to grow from nearly $12 billion in 2015 to $21 billion in 2017, and will decrease to $17 billion in 2019. Low oil price is expected to impact the market, leading to a number of delayed projects.

Report author, Balwinder Rangi says, “This can be seen in the declining number of orders for 2015 and subsequent installation decline in 2018. Projects already under construction are unlikely to be affected.”

FPSOs represent by far the largest segment of the market both in numbers of installation and forecast Capex during 2015-2019, followed by tension leg platforms (TLPs). 

Latin America will see nearly a third of the 110 installations forecast, Rangi noted, while Asia will account for nearly a quarter of forecast installations, but only 13% of spend.

“Africa is important in value terms, with 22% of the projected Capex. Western Europe is expected to form 15% of forecast spend. Deepwater expenditure will make up 68% of the global FPS market,” Rangi explains further.

Visiongain calculates global Capex on new build and converted FPSO units to amount to $8.6 billion in 2015. South America and West Africa will see the highest investments because of ultra-deepwater discoveries in the pre-salt basins.

According to the firm’s FPSO Market 2015-2025 report, as more countries reduce onshore output with the development of new offshore reservoirs, Southeast Asia, too, has potential for growth.

However, in the next two years, low oil price and completed FPSO projects will change the dynamics of the market and growth will fall subsequently. The market will only continue to attract significant spending for the next 10 years, as long as oil prices are high enough to warrant investment.

“FPSOs present an attractive and sometimes the only option in monetising new discoveries.  However, given the relatively high cost of constructing FPSOs, future oil prices will have a significant effect on the market over the coming decade,” commented the report’s lead analyst.

While the FPSO marktet posses uncertainity, Visiongain anitcipates for expenditure on oil and gas infrastructure security to reach $25.43 billion in 2015.

Unconventional oil and gas boom, low oil price collapse, expansion of LNG supply chain, offshore developments and the emergence of digital oilfield are some of the factors driving increased security spending. 

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