In its DW Monday report for June 22, Douglas-Westwood (DW) commented on the difficult year that FPSO contractors are having, and offered its forecast for FPSO contracts through 2019.
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 $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. The first half of 2014 saw two newbuild contracts worth over $1 billion each, in addition to the awarding of a $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 is rumored to be considering canceling two topside contracts for FPSOs planned on the Buzios field. DW 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.
DW says that, while 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, DW still forecasts that FPSOs with a total value of $60 billion will be installed 2015–2019 and within DW’s in-house data, DW is tracking more than 130 potential future deployments.