FPSO 2019: making the most of stable oil conditions

This month, over 150 delegates from all markets met in West London for the FPSO Congress 2019. Whilst the themes of the three-day event were varied, most speakers and attendees were concerned with the same thing: how to ensure growth in the FPSO market over the coming years.

Speaking to the delegates in London on the second day of the event was a representative from Rystad Energy, who presented some interesting and surprising trends that all those invested in the FPSO sector should read.

Any quotations in the text have been edited for brevity and clarity.

Oil barrel price: the new 100

The reason that the market crash of 2015 and 2016 occurred was due to a massive drop in drilling activity, causing a shift in business focus that is only now beginning to bear fruit: namely, from a growth-centric environment to a value-building one.

Despite issues with the US and China in the past eighteen months, oil demands will continue to grow and strengthen throughout 2020 and 2021. However, the now regular oil barrel price of between $60 and $70 will be, according to Rystad, “the new $100”. But how will this affect the future shape of the FPSO market?

Phased developments and upscaled drilling operations

The new market conditions have set up an environment for “scaled-down developments” that include smaller FPSO vessels, “phased development” of platforms, and an increase in the amount of drilling operations. Since the crash of 2015, the average time required to develop an FPSO has decreased from 36 months to 26 – as have the cost of developing all floating offshore vessels, from FSRUs to FLNGs.

There have been 105 projects sanctioned for 2019, an all-time high, but this will decrease back to 2018 levels of under 90 in 2020. One aspect of the FPSO market that will continue to grow unabated is the offshore facility leasing market, which will grow faster than any other part of the order book, drilling activity, shale exploration, or onshore infrastructure.

As to the actual number of FPSOs set to hit the market, between 2019 and 2022 there will be 33 new vessels worldwide. The area of greatest demand is South America, with 15 FPSOs to be sanctioned – followed by six in Asia, Africa and Europe with five apiece, and a further two in Australia.