Westwood: Solid year for floating production systems

Following a harrowing 2016 for Floating Production Systems market when not a single FPS unit was ordered by the oil industry, this year, 2017, has seen the FPS market return.

According to a report issued by Westwood, an energy intelligence firm, this year has been a solid one for the FPS market, with a total of 10 units coming on stream so far in 2017, including high-capex units that were ordered prior to the downturn, such as the P-66 and Armada Olombendo.

What is more, compared to 2016, when no units were ordered, this year has so far seen eleven units ordered, including the Liza FPSO by Exxon, and Sépia FPSO by Petrobras and the Mad Dog Phase 2 FPSS by BP.

According to Westwood, the orders so far highlight the fact that a range of developments are proceeding. Numerous projects have also moved towards FID as operators seek to capitalize on lower supplier prices and replace reserves, the energy intelligence firm said.

Also worth noting, Statoil on Friday announced the letter of intent with Sembcorp Marine for the hull construction contract for the Johan Castberg FPSO.

Latin America leads the pack

Capex for both installations and orders has increased by 12% and 22% respectively, compared to the Q1 edition Westwoods’  FPS report, with orders reaching $45bn and installation expenditure totalling $57bn over 2017-2021. This increase is driven by increased confidence in the sector and materially lower field development costs.

Providing a regional forecast, Westwood sees Latin America as remaining dominant in the sector, accounting for 32% of Capex and 36% of installations.

“The majority of expenditure will be for Petrobras’ fields in water depths >1,000m which were ordered in 2010 and are yet to be installed. Installation expenditure will be diverse, with Africa, Asia, North America, and Western Europe all forecast to have installation expenditure of over $5bn.”

Westwood expects 2017 and 2018 to dominate installation expenditure (accounting for 69% of forecast expenditure over 2017-2021), driven by units ordered before the downturn.