Page 23: of Maritime Reporter Magazine (February 2023)

FPSO MARKET UPDATE

Copyright Freshidea/AdobeStock il prices in excess of $80/barrel, and the ex- pectation that they will hold ? rm or rise in the near future, has helped to drive a strong recovery in the deep water sector and bright-

Oened prospects for capital expenditure for ? oating production systems, an energy segment that was on life support only a few years ago.

While oil majors are still holding back on major increases in capital spending, “this is changing,” said Jim McCaul, IMA/

WER, who has analyzed the ? oating production business since 1995 and recently released Annual Review and Five-

Year Forecast of Orders for Floating Production System. “Oil prices have risen to levels that support investment in new facilities and capex budgets are slowly expanding. The pro? t opportunities are too great to pass up.”

Most recently, Reuters reported that Exxon Mobil was pre- paring to approve its ? fth oil production project in Guyana and is considering taking additional exploration acreage, ac- cording to a Reuters report on OEDigital.com. [https://www.

oedigital.com/news/502185-exxon-set-to-order-? fth-guy- ana-fpso-sizing-up-more-blocks]

This comes as global in? ation takes a heavy toll, with the latest development expected to cost about 27% more than the last, which is due both to in? ation and the increased size of the project.

The company’s proposed ? fth development, at an oil? eld called Uaru, would pump about 250,000 barrels of oil per day at peak, for a development that is estimated to cost about [original] 60 are already gone, I’ve seen them come and go from the planning stage to the development stage to the instal- $12.68 billion, according to an estimate prepared for Guyana’s

EPA. Exxon has submitted a development plan for the oil? eld, lation stage to the decommissioning and scrapping stage. It’s and an initial construction contract was awarded last fall to like old friends disappearing!”

McCaul said that the market had been in literal freefall since

Japan’s Modec. This will mark Modec’s debut in Guyana.

Exxon and its partners Hess and CNOOC Ltd. inaugurated 2016 “when the Saudis decided to put all the American tight oil people out of business by driving the price of oil down and

Guyana’s production in 2019 and today deliver all the oil out- put in the country, from its 10,347 sq. m. Stabroek block, via starving them from revenue. It didn’t work, but the investment two FPSOs, the Liza Destiny and Liza Unity, both supplied in the sector really began to fall off. Just as it was beginning to hum again, along came COVID and that knocked the business by SBM Offshore.

Overall, orders for production ? oaters have returned to for a loop again.”

Along the way, orders for ? oating production units have historic pace and a large backlog of deep water projects has developed. More than 200 projects in the planning stage are swung wildly, from up to 20 one year, down to zero the next.

“In 2021 we began to recover; ‘22 was a very good year likely to require a ? oating production system for ? eld devel- opment over the coming decade, according to the IMA/WER [with orders for 11 FPSOs and FPUs combined]; ‘23 [and the report, and the backlog includes about 60 projects requiring an foreseeable future] looks wonderful.”

While the value of a single FPSO contract [$2.5-$3B] is

FPSO within the next ? ve years.

astronomical in traditional commercial shipbuilding contract terms, McCaul noted that further growth in ’22 was muted

RIDING THE ROLLERCOASTER

Like the offshore oil and gas business itself, the market for by a capacity problem – both in terms of human capital to ef- ? oating production systems – projects that can easily exceed fectively bid and manage a multi-billion, multi-year projects, $10 billion, with the FPSO alone costing $2.5-$3 billion – has plus a physical limitation in the number of shipyards that have drydocks big enough to accommodate the units.

endured its fair share of high and lows over the past generation. “There are only so many contractors that can take these or- “I’ve watched this business grow from something like 60

FPSOs up to close to 200 today,” said McCaul. “A lot of the ders, as ? rst of all, the unit itself, the FPSO is complicated, www.marinelink.com 23

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