BW Offshore sends another laid-up FPSO to scrap yard

Prompted by a lack of redeployment opportunities for older vessels, BW Offshore has arranged to recycle another one of its floating production, storage and offloading (FPSO) vessels at a yard in India in a bid to pursue portfolio optimisation through divestment and recycling options.

BW Offshore informed on Monday that it had signed an agreement to recycle the FPSO Umuroa in compliance with the Hong Kong International Convention at Baijnath Melaram yard in India. The company says that the sale of this FPSO will generate a cash consideration of $13.5 million in net liquidity.

In its presentation containing the results for the 4Q 2021, which was published in February 2022, BW Offshore explained that the FPSO Umuroa was in cold lay-up in Indonesia and, at that point, the firm was evaluating recycling options as this FPSO was one of the remaining two candidates for recycling.

The FPSO operator’s update regarding the recycling of this FPSO explains that the Indian yard where the vessel will be sent is certified to ISO standards and has been issued with a statement of compliance by Class NK in accordance with the IMO Resolution MEPC.210(63) and the Hong Kong International Convention for the safe and environmentally sound recycling of ships.

Moreover, BW Offshore plans to nominate a third party to be on-site at the recycling yard to ensure health, safety and environmental regulations are followed while a Ship Recycling Plan has been prepared and provided by the yard in cooperation with the Gujarat Maritime Board in compliance with required regulations. As a further incentive for safe operations, BW Offshore will pay a safe recycling bonus upon completion.

Converted in 2009, the FPSO Umuroa had an oil production capacity of 50,000 bbl/d and a storage capacity of 789,000 bbl. This FPSO had worked on the Tamarind-operated Tui field, located offshore New Zealand, from 2007 until Tamarind terminated the contract in October 2019.

The termination became effective in December of that year when Tamarind went into insolvency without any funding secured for the FPSO decommissioning and abandonment liabilities, which left the vessel stranded on the field. Afterwards, New Zealand’s Ministry of Business, Innovation and Employment (MBIE) became responsible for the decommissioning of the Tui oil field.

Back in November 2020, MBIE signed an agreement with BW offshore to demobilise and disconnect the FPSO Umuroa from the Tui oil field, which allowed the FPSO operator to cease the previously announced liquidation of its subsidiary which owns this FPSO to avoid further accumulation of losses. In May 2021, the FPSO Umuroa was disconnected from the Tui field after spending 14 years there.

Within its fourth quarter and full-year results in late February 2022, BW Offshore revealed it recorded an impairment to the book value of five FPSOs, amounting to $66.6 million, in the fourth quarter of 2021.

The FPSO Umuroa was one of these FPSOs. The company elaborates that the impairment reflects continued uncertainty around redeployment and extension for certain older units in the fleet. According to BW Offshore, this was closely tied to the market volatility and future development of oil prices due to an increased focus on energy transition.

In line with this, BW Offshore announced its decision to sell one of its FPSO vessels in January 2022, as part of its strategy to transition to floating energy infrastructure investments. To take further advantage of this strategy, another one of these FPSOs, BW Cidade de São Vicente, was sold for recycling in February 2022.

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