Market report: FPSOs … Mapping the path forward

COVID-19 will continue to skew the market for liquid production systems for the next 24 months, while purchasing power for a large part of the FPSO contracts will be centered in Brazil and Guyana / Suriname. These two areas are expected to account for more than 60% of the FPSO contracts awarded between 2021 and 2025.

These are the results shared in a recent report on floating production prospects produced by the International Maritime Associates (IMA) and World Energy Reports (WER).

The more than 100-page report examines business conditions that are likely to drive investment decisions in deep-sea development over the next five years and forecasts the number and timing of orders for floating production systems through 2025.

  • Click to request a demo of the database for more information on report and pricing options here.

FPSO overview
According to the WER database, 220 floating production storage and unloading vessels (FPSOs) are now in operation, on order or available. They account for 68% of the total liquid stock of oil / gas production.

While all FPSOs are designed to produce, store and discharge oil on offshore fields, each is designed and equipped for use in a specific field. The result is a diverse inventory of FPSOs – with large differences in plant processing capacity, oil storage volume, mooring system design and construction costs.

Some FPSOs are small units with <20,000 b / d oil processing plants; some are mega-units capable of processing 250,000 b / d. While most are ship-shaped, a few have cylindrical hulls. Some are equipped with external or internal towers for weathervane; others are scattered moored.

Some are designed to stay permanently in the field, others need to be disconnected quickly.

The cost of building an FPSO varies from $ 200 million to $ 3 billion depending on the capacity of the production facility, design life, local content requirements, operating environment and other factors.

FPSOs have a number of important advantages over other production systems. Most important is their in-field storage capacity, which enables production in locations that are economically inaccessible to pipeline infrastructure. Among other benefits: water depth is not a limitation, they can operate in environments ranging from benign to harsh, FPSOs can be changed and relocated after depletion of the field and leasing of FPSOs has evolved into an industry-accepted procurement practice for to transfer the financing burden, construction risk, residual value risk and operational responsibility from the field operator to a contractor.

But there are also disadvantages. Subsea affiliations associated with FPSOs generally incur higher maintenance costs. Redistributing an FPSO is not as easy as it may seem – each field is different, which typically requires major changes to the topside facility and mooring system.

More than 90% of the FPSOs currently in operation are located in six major regions. Brazil accounts for 29%, West Africa 24%, SE Asia 15%, Northern Europe 13%, China 7% and Australia 5%. The remaining 7% is spread across the Gulf of Mexico, eastern Canada, SW Asia and the Mediterranean.

Ownership of FPSOs is almost evenly distributed between field operators and leasing contractors. Field operators own 53% of the total holdings; Leasing contractors own the remaining 47%.

Petrobras is the clear heavyweight in the FPSO sector. Petrobras counts both owned and leased units and has 49 FPSOs under its control – 22% of the FPSO inventory. Other major field operators using FPSOs are CNOOC (13 units), ExxonMobil (12), Total (nine) and Shell (eight).

The largest FPSO contractors are SBM, Modec and BW Offshore. These three companies control 22% of the FPSO inventory.

Ownership of FPSOs from November 2020

Growth in FPSO inventory
The number of FPSOs in operation or available for implementation has grown by 26% over the last 10 years – from 159 units at the end of 2011 to 200 units at the end of 2020. This reflects the net result of supplying new FPSOs and scrapping of aging units over the 10-year period.

The expansion of the FPSO fleet has been increasing and the stock of existing units has probably now peaked at around 200 units. Taking into account units when ordering for delivery this year minus FPSO removal in 2021 due to expected ground closures, we expect FPSOs to be operational or available for numbers between 196 and 200 units by the end of 2021.

While a further 14 FPSOs are scheduled for delivery between 2022 and 2024, the number of scraps in the same period is likely to be higher, causing the number of FPSOs in operation or available to begin to slowly decline over the next two or three year. While the number of FPSOs will decrease, the processing capacity of the total FPSO inventory will continue to expand as incoming larger units replace less aging FPSOs removed from service.

Orders for FPSOs
Contracts for 79 FPSOs were placed between 2011 and 2020, an average of almost eight FPSOs commissioned annually. There has been great variation around this average – with orders ranging from a maximum of 14 contracts in 2014 to no contracts in 2016. Contracts for four FPSOs were awarded in 2020 – three for Brazil, one for Senegal.

In total, 64 of the 79 FPSO contracts (81%) over the last ten years involved the construction or conversion of first-time FPSOs. These FPSOs have not previously functioned as production units. A further 15 contracts (19%) involved the conversion of an existing FPSO to a new field. The conversion contract typically involves major changes to the process plant and mooring system plus general upgrade to the entire unit.

FPSOs are being built now
Twenty FPSOs are currently on order. Six are in the final stages of completion, with delivery scheduled over the next 12 months. Seven are scheduled for completion in 2022. Seven others are in the early stages of construction with delivery scheduled for 2023/24.

Eight (40%) of the ordered FPSOs are built for use offshore Brazil. The others are destined for Guyana (two), India (two), Mauritania / Senegal (two), UK / Norway (two), Israel (one) and Mexico (one). Two additional orders are speculative FPSO hulls that are likely to be used on projects in Brazil or Guyana.

China is the dominant location for FPSO construction and conversion. Seventeen of the 20 FPSOs ordered have been partially or fully outsourced to Chinese shipyards. Singapore has retained the second position with at least partial involvement in two of the 20 orders. Korean shipyards – which had been a strong force in this market sector – have only one FPSO contract underway. Topside’s manufacturing and integration of plants is spread across a number of contractors in SE Asia, Northern Europe and Brazil.

Planned FPSO projects
From mid-January 2021, there were 110 projects in the planning phase that could require an FPSO as a production system. About 38% of the planning phase FPSO projects are located in Brazil, some of which require more FPSOs. Africa ranks second with 24% of planned FPSO projects. Nigeria and Angola account for two thirds of the African projects. Other important locations are SE Asia, Northern Europe, Guyana / Suriname and Australia.

Details of all FPSO projects in the planning queue can be found in the WER online database, information that is kept updated daily.

Projected orders for FPSOs
A bottom-up method was used to predict the number of FPSO orders. We examined each FPSO project in the planning queue to determine its likelihood of moving on to an investment decision by the end of 2025. The forecast takes into account future oil prices, capex budgets, deep-sea competitiveness and other underlying business drivers in each of the three market scenarios – as well as each project’s status, procedure barriers, reserve size and quality, operator economic strength and capital allocation strategy and other factors.

Depending on the future business scenario, we expect orders of 23 to 48 FPSOs over the next five years. Our most likely forecast is 37 orders on FPSO. This figure is 28% higher than the number of orders placed in the last five years, when 29 FPSOs were ordered – but 26% lower than the number of orders during 2011/15, when 50 FPSOs were entered into.

Orders for FPSOs will be skewed towards recent years in the five-year forecast period – reflecting the expected continued effect of COVID-19 for at least the next two years. Purchasing power for a large proportion of FPSO contracts will be centered in Brazil and Guyana / Suriname. These two areas are expected to account for more than 60% of the FPSO contracts awarded between 2021 and 2025. The remaining 40% of the FPSO contracts will be with customers in SEA / China, Africa, No Europe, Australia and other areas.

Based on the experience of the last ten years, we expect that around 20% of future FPSO projects will involve the use of a relocated unit – and the number of FPSO contracts expected in our most likely market scenario will generate a demand for eight FPSO shifts over the next five years.

This relocation requirement will not absorb the entire FPSO looking for new fields. Currently, 25 FPSOs are in layup. Of the units in the layup, 14 may seem suitable for redistribution. Including FPSOs now off the field and FPSOs likely to end production by the end of 2025, there will be somewhere between 25 and 35 FPSOs available for redistribution during the forecast period – at least three times the number of probable contract options.

Capex associated with FPSO orders over the next five years is expected to amount to 56 billion. $ In the most likely scenario – an average capex of 11.2 billion. $ Pr. Year.

Details of all FPSO projects in the planning phase and our assessment of which specific projects are likely to lead to an EPC contract over the next five years can be found in our forecast report.

  • For more information on the floating production report and online database, please visit or contact Bailey Simpson @ + 1832289-5646

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