The crash in oil prices has led to a dramatic decline in the number and value of awards for FPSO units. There have only been three contracts awarded this year; a conversion for the Sankofa-Gye Nyame development in Ghana, a small conversion in Iran and an upgrade in Indonesia. In total these awards account for around US$1.5 billion.
By comparison, in the first half of 2014 there were six orders and crucially, the value of those six was 528% higher than the three this year – demonstrating the lack of high Capex orders in the current low oil price environment. H1 2014 saw two newbuild contracts worth over US$1 billion each, in addition to the awarding of a US$4 billion contract for two converted FPSOs on the Kaombo field in Angola. This demonstrates the current caution of operators at the moment as they aim to bring costs down and wait for a recovery in oil prices before commissioning major projects.
Expectations for the rest of this year are little-better. Many awards have been pushed into 2016, while Petrobras are rumoured to be considering cancelling two topside contracts for FPSOs planned on the Buzios field. Douglas-Westwood forecasts that four more awards are likely this year while a further five could potentially be awarded if there is an improvement in the oil price.
Whilst the immediate outlook may not be positive, the future of FPSOs is still considered encouraging. FPSO solutions will be vital for the development of oil and gas fields in deeper waters as well as for marginal fields in mature regions. The current low oil price may lead to a decline in orders that continues well into 2016. However, Douglas-Westwood still forecasts FPSOs with a total value of US$60 billion will be installed 2015 - 2019 and within our in-house data we are tracking over 130 potential future deployments.
Ben Wilby, Douglas-Westwood London
Adapted from a press release by David Bizley