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MARKET FPSO • Deepwater future supply role – Deepwater produc- Based on our analysis of future market conditions, we tion now accounts for approximately 10% of global are forecasting orders for 41 to 56 FPSOs and eight to 12 oil supply and we expect it will continue to provide 8 FPUs between 2020 and 2024. The construction contracts to 12% of world oil supply over the next 20+ years. are expected to generate expenditures of $56 to $77 bil- • Supply disruption risk – Global supply of oil and nat- lion. Brazil is expected to account for 30% to 40% of the ural gas is fragile and the possibility of major supply FPSO orders over the next ? ve years. Africa is expected to disruptions very real; the disruption threat incentiv- be the second largest source of FPSO activity, with around izes investment in deepwater development as a supply 25% of the orders. Next in line are Northern Europe and security cushion. Southeast Asia/China, each with around 10%. • Oil prices – We expect Brent crude to trade in the $55 We expect that 20% to 25% of FSPO projects over the to $65 price range over the next ? ve years, gradually next ? ve years will involve use of a redeployed FPSO. As- increasing to $70 to $75 through 2035 in our most suming the most likely forecast scenario, we expect 10 to likely scenario. 13 FPSO projects will entail redeployments. FPU orders • Deepwater/shale competiveness – While tight/shale over the next ? ve years will be principally, if not wholly, rock development remains the major competitor to comprised of production semis. Most will be for projects deepwater investment, productivity gains are slowing, in the US Gulf of Mexico or offshore Australia. creating upward pressure on tight/shale rock break- No TLP and few spar projects are currently visible. even price.

• Cost of capital for deepwater exploration and produc- tion (E&P) – The deepwater sector remains attrac- tive to banks, hedge funds and others, and ? nancing is readily available for production ? oaters backed by

SAMPLE THE REPORT long-term lease with substantive counterparty. 2020 PRODUCTION • Access to Brazilian deepwater resources – The govern- ment has been opening foreign investment opportu-

FLOATER FORECAST nities in Brazilian offshore resources and has relaxed some local content requirements.

Details for the 2020 pro- duction ? oater forecast

In the (mostly) negative category are are provided in the IMA/

WER market outlook • Engineering, procurement and construction (EPC) report issued in late contractor constraints – Capacity of major FPSO leas- 2019. We examine timing ing contractors to simultaneously perform multiple of EPC contracts, sources large FPSO EPC+ lease contracts could constrain the of buying power, ? oater near term pace of FPSO projects. E.g., Modec now procurement strategy, has seven large FPSO contracts at various stages of use of redeployed FPSOs, completion. Modec has never had a backlog this large competitive landscape, – execution of which will test the depth of the com- etc. In our monthly re- pany’s project management capabilities. ports we track how actual • Upstream investment constraints – Capital spending order intake correlates with the forecast and in March of each year we recalibrate the forecast to re? ect changes in on upstream projects continues to be weak as oil com- market situation. For information about the 2020 Floating panies emphasize “? scal discipline” and set-aside avail-

Production Report and Database, please visit: able cash for dividends, stock buybacks.

www.worldenergyreports.com

In the unknown category are or contact • Black swans – Negative and positive unexpected

Paul Morris events impacting activity in the deepwater sector will [email protected] undoubtedly occur over the next ? ve years. They have t. +1 212 477 6944 in the past – e.g., 2010 Macondo oil spill.

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