fpso industry trends 20121

FPSO InduStrytrendS

w w w. f p s oa s i a .co m

IntroductIon

Despite the vast amounts of research on the fpso

industry, there aren’t too many publications

asking fpso owners and operators what they are

continually investing in, and given this lack of information in

the market, oil & Gas iQ and the fpso Network, have co –

organised a study with 158 companies in the fpso sector,

who are willing to share their thoughts on the trends in the

floating, production, storage and offloading sector.

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DiD youknow ?

45% of those polleD will Be actively iNvestiNG iN mooriNGaND riser systems

FPSO InduStry trendSw w w . f p s o a s i a . c o m

Despite the economic uncertainty in capital markets, the massive

growth in the fpso sector is set to continue. this not only points

to an immense amount of growth in the sector but possibly potential

competition for fpsos.

of the 158 people who took part in the survey, 55.8 % believe that the massive

growth in oil fpsos is set to continue.

But some respondents of the survey believe that this purple patch for the oil fpso

sector will lose its shine because of the rise of lNG fpsos. with the emergence of

natural gas power generation and with many countries attempting to diversify their

energy supply, 35.3% of the survey respondents believe that over the coming years,

lNG fpsos will steal the limelight given the growing support for natural gas.

FPSo InduStry trendS

©modec

the country that seems to be driving lNG demand is Japan. since the

massive earthquake and ensuing tsunami that rocked the country in

march 2011, Japan has turned away from nuclear and focused its power

generation efforts on natural gas. a bold move, since the countries

electric, power and gas companies have been criticized in Japan for

allegedly buying the most expensive lNG in the world, especially

after increases of imports in 2011 and wider public awareness of less

expensive gas in other regions of the world, especially in North america.


32%

the massive growth in oil fpsos is set to continue

4.5%4.5%

35.3% 55.8%

lNG fpsos will steal the limelight given that natural gas is the next big thing

it is time for unconventional resources to usurp the conventional ones

others

operation, with another four close to delivery. our competitors have seen

smaller but significant growth as well. total now has at least six large

new-build fpsos in operation, and petrobras has a dozen, with many

more planned. and there are other companies with valuable experience

too,” Joysnon explains.

this experience has transformed the fpso from being a niche product

into a mainstream solution of choice in deep water. Units are growing in

oil production capacity and becoming more complex, with the inclusion

not only of sea water sulphate removal equipment almost as standard,

but now also co2 removal and co2 reinjection as well. this trend will

continue as operators try to squeeze as much value as possible from each

fpso that enters service on the major fields.

a significant number of respondents believe that oil operators prefer to lease

fpsos rather than own and operate one. with 69% of the respondents believing

that this is the case

owneD vs. LeaseD FPsos

so why wiLL this suPPoseD FPso growth materiaLise?

Jerry Joynson, Director, proposals & technology Development at

sBm offshore, explains the evolving dynamics in the fpso industry.

“onshore oil production is in slow decline yet world oil demand

is increasing. the numbers are significant, with an increase in offshore

production from 21 to 27 million b/d between 2008 and 2013. this trend

is continuing, which adds up to a lot of new facilities required. the major

growth opportunity is in deeper water which guarantees a healthy demand

for floating production solutions for quite some time. and around 60% of

those are predicted to be fpso projects, both new-build and conversions,”

he said.

this can only mean an upturn in fortunes for the fpso sector as Jason

waldie, associate Director for Douglas westwood, explains that fpso

projects are returning to pre-2008 level and a turn of fortunes for the

sector is imminent.

“there was a material decrease in orders since 2009, but it seems that

market has bottomed last year and there is an increasing share of the market

which is being leased to fpsos. the deep water horizon disaster is unlikely

to impact the fpso sector as the Gulf of mexico accounts for a small part of

the market and in the long term it seems as though growth will return as the

fpso market is set to reach Us$16 billion by 2014,” explained waldie who

is responsible for the firm’s activities throughout the asia pacific region.

Joynson shares waldie’s sentiment, by outlining the growth of the sBm

over the past decade. “twelve years ago sBm only had two large fpsos

in operation, Kuito and espadarte. today we have 15 leased facilities in


67.9%

32.1%the massive growth in oil fpsos is set to continue

lNG fpsos will steal the limelight given that natural gas is the next big thing

the rationale for using a leased versus owned fpso is relatively simple, explains Dr. roger Knight, from

infield systems.

“the most important rationale driving the decision to buy as oppose to lease, comes from the particular nature

of the field itself, how this relates to solutions and associated charges presented within the leased market,

and whether the operator is able to fund the capital required to own an fpso. to use a home buying analogy,

should an individual have a specific wish list for their new property, for example wanting 10 bedrooms and a

revolving roof, this is unlikely to be found on the rental market. however, if the individual has enough access

to capital, then they will be a then they will be able to fund this ambitious project themselves,” he said.

although many fpso vendors may prefer the leased model instead of the own and operate model, financing

would seem to be the major stumbling block that prevents this from happening. the leased model is attractive

when there is plenty of liquidity in the market, simply because operators will be able to access a lot of debt and

be able to leverage the project and the pricing on the debt was very low.

Why IS thIS So?

©modec

with a high leverage and low cost of

finance the return of investment would

be very high, the tables have turned

however and banks tend to extend less

financing and with leverage being lower

the cost of debt has increased, making it

difficult to get a high return. therefore

in this environment, oil majors look at

the cost involved when it comes to the

rate over a specific period of time and

realise that it may perhaps be better to

own the asset.

Ultimately determining whether to

lease or own an fpso boils down to

the timescale of the field and how long

the asset will be operating in the field.

if the field is only going to last 5 years,

and investment of $100 million is not

required, and using something that is

readily available would probably be

better than building something from

scratch.


BottLenecks

when asked what part of the fpso

chain poses the biggest bottleneck,

respondents felt that the two biggest

issues were subcontractor management and

understanding field specifications accurately. with

32.5% and 29.1% of the respective votes, many in

the sector think that these are the pressing issues

that need to be overcome.

while there were other issues that caused

bottleneck issues such as commissioning,

maintenance and operations and redeployment,

it seems that they didn’t require the same

importance as subcontractor management and

understanding field specifications accurately.

perhaps here’s why?

although there are many engineering

challenges, contractors invest a significant

amount into research and development to come

up with solutions to these challenges, so the

more technically challenging projects are seen

as an opportunity rather than an obstacle.

the turnaround times for some of the smaller

shallow water fpso projects are relatively

quick, more often than not; this is most likely

the case when the oil company has already

procured most of the equipment for the fpso

project. from start to finish, the contracting

work to the actual installation in the field may

take up to a year.

a deep-water project on the other hand will be

a more technically challenging project, in these

cases; the beginning of contract work to the

execution of the contract could take as long

four years, making the type of work for each

fpso very different.

with larger, deep-water fpsos, the

contractors seem to take on a lot more risks

because the epcs are fully responsible for the

design related aspect of the asset. however,

for a pure installation contract, a lot of the

risks are covered by others, because everything

has already been designed and the epc only

has the installation risk to be concerned over.

for fpso projects, where there are multiple

contractors involved, the interface issues

could become very complicated and this could

ultimately lead to delays.

©teekay


Understanding field specifications accurately

9%

12.8%

16.7%

32.1%

29.5%

subcontractor management

commisioning

maintanance and operations

redeployment

inDustry investment

that’s perhaps why the industry is continuing to actively invest in mooring

and riser systems. our research has revealed that 45% of our respondents

will be actively investing in mooring and riser systems, only 27% of the

respondents are investing in turbines, compressors and engines. while 13.9%

and 11.3% of the respondents have claimed that they will be spending on water

treatment and injection as well as power automation respectively.

for deep-water fields, the percentage of the total development costs is below

the water line, an fpso is a large investment but the installation costs, the risers,

the pipelines and the sub-sea trees is now more than the actual fpso. when

placing pipelines into deep-water, the equipment that will go onto the seabed

will cost more and the expertise is rarer so ultimately the deeper you go the more

expensive the project will cost.

©modec


power / automation

turbines, compressors, and engines

mooring and riser systems

water treatment / injection

coating

11.5%

3%

14.1%

45.5%

26.3%

Financing avenues in the FPso sector

the recent economic crisis has revealed

that it’s becoming increasingly difficult for

contractors to raise finance for leased fpso

projects. it seems that almost three quarters of

those involved in our study feel that the economic

crisis has made smaller players in the fpso sector

very vulnerable. only 23.2% feel that the industry

has had no impact as a result of the economic crisis,

this could be because of the large order books that

select companies have had prior to the economic

situation reaching its crisis point or the significant

cash reserves of these companies.

typically the banks and the project finance teams,

have been deeply involved in fpso financing, and

these assets have been typically financed under

asset based financing schemes. when it comes

to fpso financing there are typically very large

transactions where there will be 5 – 15 banks

involved in the financing of an fpso. what is very

well known is that financial institutions have been

weakened by the financial crisis which has spilt

over to europe and is deeply affecting long-term

financing capacity.

in the past european banks have relied on the

money markets in the United states, to refinance

themselves in U.s dollars, but after 2008 this market

disappeared. so the trend in europe today is for banks

to reduce their activities in U.s dollars especially for

long term financing. for fpso players there will be a

constraint on financing because banks are extending

their project finance in euros but for the players who

are involved in U.s dollars the banks are exiting the

market creating a gap that will need to be filled by

alternate financing schemes. the most recent trend

to address this gap is the bond markets; there is also

an opportunity for the export credit agencies (eca’s)

in terms of funding, which we have noticed with large

scale projects in australia.

the general consensus in the market is that we have

yet to see the full effect of the financial crisis on the

fpso industry and there could be several patterns

developing because of these constraints.

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the economic crisis has had no impact

the economic crisis has made smaller players in the fpso sector very vulnerable

others

23.1%

4.5%

72.4%

researched & Developed by

17-20 september 2012 | singapore expo

moNetisiNG offshorereserves with aDvaNcemeNtsiN fpso techNoloGy

UNpreceDeNteD represeNtatioN from oil operators, vessel owNers, sUBcoNtractors aND fiNaNciers

antonio caiLao, ceo, PhiLiPPines nationaL oiL corPoration

carLos mastrangeLo, wr facilities maNaGer, PetroBras

Lars oDeskaug, coo, sevan marine

maarten van aLLer, coo, PetroFac FLoating ProDuction

michaeL hamBLin, Gm – proDUctioN, wooDsiDe energy

13th aNNUal fpso coNGress -what’s captivatiNG?

reFineDan enhanced speaker profile for 2012 featuring Bumi armada(vp - fps), sevan marine (coo), petrofac floating production(coo), pNoc (ceo), woodside (Gm - production).

inventivetwo exclusive site visits to sBm’s fpsos in singapore andtechnip’s production facility in Johor Bahru (malaysia).

enhanceDa superior venue with an improved exhibition space in singapore expo.

DriLLeD DownDedicated Geo Updates on the fpso industry from Brazil, Nigeria, australia, india and china.

unveiLeD showcase of brand new technologies and updates from technip, subsea7, aibel, aBB,wartsila, hempel.

log on to www.fpsoasia.com for a full list of speakers and the full congress agenda

or email [email protected]

or ring +65 6722 9388 to find out how you can be involved.

DoN’t miss the two eXclUsive site visits!sBm offshore’s fpsos iN Keppel

shipyarD, siNGaporeasiafleX proDUcts - a techNip

facility, Johor BahrU, malaysia

fpso industry trends 20121

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