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$16 million newbuild contracts

$16 million newbuild contracts
Floating production systems remained in demand this year as the offshore gas and oil industry have spent over USD 16 billion on newbuild contracts.
According to EMA, the inventory of Floating Production Systems Reaches 264 units – and FPSOs account for 60% of the existing systems. Another 99 floating storage/offloading units (without production capability) are in service.
 
Thirteen production floaters and two FSOs have been ordered so far this year, EMA says. They include three large converted FPSO units for Angola, three newbuilt Production Barges for Indonesia, three floating regas units, two units for the U.K. North Sea, and two FLNG units. The pace of orders has recovered sharply from last year and is 25% above the 16-year average.
 
Two large LNG projects encountered setbacks recently, with Australia’s Bonaparte development deciding not to proceed with an FLNG FEED and Woodside terminating its MOU to invest in Israel’s Leviathan project. EMA claims that the issue for these mega-FLNG projects seems to be an insufficient risk/reward balance in the eyes of the oil companies.
 
However, soon after these announcements, Golar LNG confirmed that it was placing a USD 735 million order with Keppel shipyard to convert a 1975-built LNG carrier into a 2.2-2.8 mtpa FLNG unit on speculation.
 
According to EMA,  Petrobras, in order to develop the additional resources in the Transfer of Rights Area offshore Brazil, has advised it will require at least 10 more floating production units. Two units are planned to commence operations in 2021, with an additional eight units to be installed between 2022-2025. This is on top of the 14 units still to be contracted as per their 2014-2018 business plan.
 
There are currently 65 production floaters, 8 FSOs and 4 MOPUs on order, EMA reports. This is a 5% increase from last quarter and reverses the steady decline that began in Q1 2013. This increase in the order backlog is due not only to new awards, but also to delays in delivery. Three projects that had been scheduled to start production in the UK or Norwegian North Sea this year have required additional time primarily during commissioning. The 8 serial FPSOs ordered by Petrobras in 2010 are now scheduled to be delivered in 2016-2018.
 
EMA’s Managing Director David Boggs said: “The fundamentals are solid for the floating production market with high, stable commodity prices, declining drilling rates, and open financial markets.
 
The question is whether the industry can meet this demand and deliver these increasingly complex projects, on-time and on-budget.
 
To overcome supply-chain constraints, companies must continue to adapt and be creative, such as by building mega hull blocks in China to be assembled in Brazil, or converting an old LNG carrier into an FLNG unit.”
 
 
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