FPSOs Set To Account For 60% Of All Deep-water Projects

Oil & Gas IQ

Jerry Joynson, Director, Proposals & Technology Development at SBM Offshore, discusses the evolving dynamics in the FPSO industry with Bryan Camoens. He also explains what the yet to be explored opportunities in the FPSO sector are and tells us his thoughts on the future of the FPSO sector.

Bryan Camoens:
Could you please explain what the evolving dynamics in the FPSO industry are?

Jerry Joynson: Onshore oil production is in slow decline yet world oil demand is increasing. The numbers are significant, with an increase in offshore production from 21 to 27 million b/d between 2008 and 2013.

This trend is continuing, which adds up to a lot of new facilities required. The major growth opportunity is in deeper water which guarantees a healthy demand for floating production solutions for quite some time. And around 60% of those are predicted to be FPSO projects, both new-build and conversions.

Bryan Camoens: What are some of the most common challenges to develop a well-balanced contracting regime and how can these challenges be overcome?

Jerry Joynson: We also see a growth in the demand for local content in a number of countries, which understandable as it is, puts pressure on the FPSO supply chain and in the short term demand often outstrips local supply capability with adverse pressure on pricing. FPSO contractors then need to get involved in the development of the local supply chain to stay competitive. We have seen this in Brazil and Angola for example.

Bryan Camoens: How do you go about evaluating the economics of FPSO projects as a cost-effective field development solution?

Jerry Joynson: FPSOs can offer cost effective alternatives to jacket and jack-up based production facilities in shallow water, depending on the specifics of the location (availability of an oil export pipeline for example).

In deeper water the economics of FPSOs are typically better, as the targeted fields are generally larger with longer production lives. Of course, the economics are sensitive to production rate and field life. Any complex facility needs a certain minimum production to fund the development.


Bryan Camoens: In your opinion what are some of the yet to be explored opportunities in the FPSO sector?

Jerry Joynson:
FPSOs will surely evolve further in several directions at once. Opportunities will exist for the supply of the largest FPSOs ever built, to operate in the harshest of environments. In parallel, there will be a streamlining of the design and supply of both mid-scale and small scale FPSOs.

We see, for example in Brazil, tendering for the supply of multiple FPSO hulls, multiple turrets, and multiples of other key equipment occurring. There will however also be some FPSOs with quite unique production facilities, as we have seen with the creation of an FPSO with drilling on board, so there will likely also be a few individual FPSOs perhaps with GTL, LNG and other gas capture solutions, and ones to deal with some extreme reservoir compositions for clients with the desire to explore those opportunities, such as Shell producing a 14°API oil across Espirito Santo FPSO with the aid of some subsea separation and pumping.

Bryan Camoens: Looking ahead, how will the FPSO sector evolve going forward?

Jerry Joynson: Twelve years ago SBM only had two large FPSOs in operation, Kuito and Espadarte. Today we have 15 leased facilities in operation, with another four close to delivery. Our competitors have seen smaller but significant growth as well.

TOTAL now has at least six large new-build FPSOs in operation, and Petrobras has a dozen, with many more planned. And there are other companies with valuable experience too. This experience has transformed the FPSO from being a niche product into a mainstream solution of choice in deep water.

Units are growing in oil production capacity and becoming more complex, with the inclusion not only of sea water sulphate removal equipment almost as standard, but now also CO2 removal and CO2 reinjection as well.

This trend will continue as operators try to squeeze as much value as possible from each FPSO that enters service on the major fields. Smaller FPSOs will also be found exploiting smaller reservoirs, for example in the North Sea fields that previously would have been developed with a platform are now often being developed using an FPSO.

FPSOs will also be used to target hydrocarbons in some of the harshest oceans and that will test our skills to their limits - the future is exciting!