Floating production set for slow revival, report claims

Offshore staff

FAVERSHAM, UKDouglas-Westwood (DW) expects capex for floating production systems (FPS) to total $58 billion between 2016 and 2020.

This is lower than the analyst’s previous forecast, but the value of the order book remains near record levels.

A series of projects are yet to progress to installation, with on-schedule and on-budget delivery still an issue for the industry. The challenge for the supply chain and shipyards will be attracting new orders once the current units are onstream.

Last year DW identified only four new FPS vessel contracts with a combined value of $3 billion. There have been no orders so far in 2016, but now that operators are adjusting to the low oil price they should begin to order again during the second half of the year.

DW expects a low order value of $2.6 billion this year, although from a higher number of orders than in 2015, with operators pushing cost reduction measures and re-engineering of projects.

Two examples are the FPSS for the Mad Dog Phase 2 project in the Gulf of Mexico (which BP should order this year) and Statoil’s Johan Castberg FPSO in the Norwegian Barents Sea.

Both fields had development plans that were uneconomic even when the oil price hit $110. Following subsequent cost decreases and revised development plans both appear to be economic at a low price, showing that operators are willing to adjust and work at the new price norm, the analyst says.

05/06/2016

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