fpso industry trends 20121
TRANSCRIPT
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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urm
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ada
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.
FPSO InduStry trendSw w w . f p s o a s i a . c o m
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
FPSO InduStry trendSw w w . f p s o a s i a . c o m
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.
FPSO InduStry trendSw w w . f p s o a s i a . c o m
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
FPSO InduStry trendSw w w . f p s o a s i a . c o m
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
FPSO InduStry trendSw w w . f p s o a s i a . c o m
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.
©B
luew
ater
FPSO InduStry trendSw w w . f p s o a s i a . c o m
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
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