Page 20: of Offshore Engineer Magazine (Mar/Apr 2019)

19 21

SUBSEA INSIGHTS Target 2020 2020: CAUTIOUS OPTIMISM FOR

AN OFFSHORE RECOVERY

BY GREGORY BROWN, Associate Director - Offshore, Maritime Strategies International Ltd.

uch has been made of an expected recovery mitment to capital discipline and ? at capital expenditure bud- for offshore. We share that optimism. We think gets. The market is still likely to offer far more opportunities there will be around 20 ? nal investment deci- than those that were presented during the downturn.

Msions (FID) for ? oating production, storage and While we advise caution for the market overall, we are more of? oading units (FPSO), nearly 60 subsea projects and a total optimistic on deepwater. In particular, we are con? dent that of 330 trees going ahead this year. However, we are concerned the Brazilian pre-salt market will drive growth for the indus- that 2020 may not offer such a positive outlook for new devel- try. We expect well over 100 trees to be awarded over the next opment activity and that momentum could turn negative. four years, along with 13 FPSOs. These will provide opportu-

The weaker medium-term outlook re? ects the impact of nities for the domestic and international supply chains, from 2015-17 exploration and production (E&P) capex cuts and the engineers, through to rigs, pipe makers and offshore instal- cyclicality of the industry. Despite having a constructive view lation work. Among the FPSOs we expect to go ahead, we on offshore overall, we think it would be prudent to model highlight the two replacement Marlim FPSOs and the second cautious optimism for order intakes for 2020 and beyond. Mero vessel as strong candidates for award in 2019, along

From the 2016 trough, order intake has rebounded; for sub- with Buzios 5. Moving into 2020, we expect the market to sea trees, the market has grown fourfold. Just 78 trees were bene? t from the opening up of pre-salt ? elds to international awarded at the bottom of the market. For 2019, we think that operators and investment. Equinor is likely to FID the Carcara more than 330 will be ordered, but to expect another year of vessel alongside the likes of Petrobras’ Itapu and Parque das +/-30% growth in a cyclical market looks far too optimistic to Baleias projects. us. While we believe that the supply chain would be able to Beyond Brazil, we’re encouraged by green? eld deepwater handle such an increase without incurring material cost in? a- basins off Guyana and India which together are likely to off- tion, the projects pipeline looks insuf? cient at this stage to set the lack of progress off Mexico deepwater investment has underpin another year of such solid growth. been curtailed in the short-term by the decision to halt upcom-

As well as a lack of projects in the pipeline, recent oil price ing license rounds. The Angolan and Nigerian markets also volatility has compounded the issue. Downward pressure has offer opportunities for the supply chain, with Angola in par- softened medium-term con? dence. In some cases the uncer- ticular offering a robust hopper of subsea tiebacks as Sonan- tainty has caused development portfolios to be reassessed, gol and its partners look to arrest a steep production decline. with upstream companies unwilling to catch the falling knife In Nigeria, we’re hesitant to call a deepwater recovery on the and FID a project in the midst of an oil price slide. The subse- back of continued delays at Bonga Southwest and Zabazaba quent delays in ? nalizing concept selections have seen several but do note the likes of Owowo and Preowei tiebacks as proj- project timescales slip to the right, while procurement teams ects gathering positive momentum. have hesitated to move projects through decision gates. Overall, we expect deepwater projects to account for around

The impact of these delays is that subsea orders could cool 55% of subsea FIDs in 2019 and close to 60% in 2020. in 2020, and that FPSO orders will likely remain broadly ? at. Beyond 2020 the lack of recent discoveries may weigh on

We expect around 290 subsea trees to be awarded, alongside the development hopper. While exploration and appraisal ac- 19 FPSOs over the course of 2020. Although perhaps dis- tivity should be robust over the next 18 months, it will take appointing in terms of momentum, this forecast should be time to ? lter through to project awards. The industry has made viewed in the context of how bleak the market was between admirable progress in shortening lead-times but we do not 2015 and 2017, and in light of oil companies’ newfound com- think that they have shortened to such a point where larger 20 OFFSHORE ENGINEER OEDIGITAL.COM 18-31 OE 2019.indd 20 18-31 OE 2019.indd 20 4/15/2019 10:43:32 AM4/15/2019 10:43:32 AM