FPSO financing still plaguing the industry

What is it about harsh weather conditions that keep top executives in the FPSO industry

on red alert? Based on a survey sent out to close to 3, 000 key FPSO executives by Oil &

Gas IQ, 59.4 % believe

that combating harsh

weather conditions seems

to be number one issue that

needs to be addressed.

Johan Gardin, Senior

Principal Surveyor and

Director of Offshore

Classification, for DNV,

believes the main

challenges of harsh weather

lie in maintaining uptime

and avoiding damage. “Uptime is threatened for example by forced disconnection and by

motions affecting the process or making maintenance and repair difficult. Damage by

green seas is well documented from the North Sea and will impact most on forward

structures but also further aft by 'climbing waves',” said Gardin.

For FPSOs, a good hull design is also key to combating the harsh weather conditions. “If

the hull design is unfortunate, seasickness may make life on board very difficult.

Needless to say, a good hull design and a robust mooring system is required and there are

specialists in this field, in particular suppliers of STL solutions. Green sea damage can be

mitigated by simple structural strengthening and barriers, although the raw force of the

sea seems to be hard to appreciate from within a designer's cubicle,” he added.

Despite the challenges faced when it comes to the harsh and erratic weather conditions

that FPSOs are facing, less than a quarter of those polled believe that the activities in the

industry are decreasing in 2010 and 2011.

Of all the respondents, 77% seem to share, Tony Mace, CEO of SBM Offshore’s view

that activities in the next two years will be increasing. Mace was reported saying that the

FPSO outlook is improving for the year

2010.

“Mace says there is potential for five total

FPSO awards by the end of this year,

which is up from zero during the previous

year or so. About 78 FPSO projects are

possible in the next 5-10 years,” said Mace

in Monaco last year.

Wha t a re your sentiments on the FPSO Wha t a re your sentiments on the FPSO Wha t a re your sentiments on the FPSO Wha t a re your sentiments on the FPSO

industry? industry? industry? industry?

Activities are

increasing in

2010/2011

Activities are

decreasing in

2010/2011

Which inte res ting FPSO innova tion would you l ike to hea r about?Which inte res ting FPSO innova tion would you l ike to hea r about?Which inte res ting FPSO innova tion would you l ike to hea r about?Which inte res ting FPSO innova tion would you l ike to hea r about?

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

FDPSO Round shape cylindrical

FPSO

FPSOs for harsh weather

conditions

Gardin agrees with Mace acknowledging that in 10 years' time, FPSO numbers will

probably be at its peak. “The current economics will only affect the industry

momentarily; there is still oil and gas in the ground and we have no big-time alternative,

so it's both ‘find and develop the fields' or 'park the car permanently',” he said.

And despite Gardin and Mace predicting a prosperous future for the FPSO sector the

main challenge that continues to haunt the sector much like the much maligned shipping

sector is financing with 42.2% of the respondent finding it a challenge. Joe Patrick,

Director of Hunter Oil probably sums it up best, “The economics of the FPSO contractors

(from) making a profit to the ability to raise capital to fund projects is probably one of the

most challenging aspects for FPSO’s.

Wha t is the most cha lleng ing aspect o f FPSO fo r you a t the Wha t is the most cha lleng ing aspect o f FPSO fo r you a t the Wha t is the most cha lleng ing aspect o f FPSO fo r you a t the Wha t is the most cha lleng ing aspect o f FPSO fo r you a t the

moment? moment? moment? moment?

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Conversion of

Double hull tankers

vs the traditional

single hull tankers

Legal and

Commercial issues

FPSO Project

Financing

Technical issues;

please state which

areas