FPSO InduStry trendS

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IntroductIon

continually investing in, and given this lack of information in the market, oil & Gas iQ and the fpso Network, have co organised a study with 158 companies in the fpso sector, who are willing to share their thoughts on the trends in the floating, production, storage and offloading sector.

espite the vast amounts of research on the fpso industry, there arent too many publications asking fpso owners and operators what they are

DiD you know ?

45% of t hose polleD will Be ac tively iNves tiNG iN mooriNG aND riser s ys t ems

FPSO InduStry trendS

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Burmi armada

modec

the country that seems to be driving lNG demand is Japan. since the massive earthquake and ensuing tsunami that rocked the country in march 2011, Japan has turned away from nuclear and focused its power generation efforts on natural gas. a bold move, since the countries electric, power and gas companies have been criticized in Japan for allegedly buying the most expensive lNG in the world, especially after increases of imports in 2011 and wider public awareness of less expensive gas in other regions of the world, especially in North america.

FPSo InduStry trendS

competition for fpsos.

4.5%

4.5% the massive growth in oil fpsos is set to continue

espite the economic uncertainty in capital markets, the massive growth in the fpso sector is set to continue. this not only points to an immense amount of growth in the sector but possibly potential 35.3% 55.8%

32% lNG fpsos will steal the limelight given that natural gas is the next big thing
it is time for unconventional resources to usurp the conventional ones others

of the 158 people who took part in the survey, 55.8 % believe that the massive growth in oil fpsos is set to continue. But some respondents of the survey believe that this purple patch for the oil fpso sector will lose its shine because of the rise of lNG fpsos. with the emergence of natural gas power generation and with many countries attempting to diversify their energy supply, 35.3% of the survey respondents believe that over the coming years, lNG fpsos will steal the limelight given the growing support for natural gas.

FPSO InduStry trendS

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so why wiLL this suPPoseD FPso growth materiaLise?

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, Joysnon explains. 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.

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, he said. this can only mean an upturn in fortunes for the fpso sector as Jason waldie, associate Director for Douglas westwood, explains that fpso projects are returning to pre-2008 level and a turn of fortunes for the sector is imminent. there was a material decrease in orders since 2009, but it seems that market has bottomed last year and there is an increasing share of the market which is being leased to fpsos. the deep water horizon disaster is unlikely to impact the fpso sector as the Gulf of mexico accounts for a small part of the market and in the long term it seems as though growth will return as the fpso market is set to reach Us$16 billion by 2014, explained waldie who is responsible for the firms activities throughout the asia pacific region. Joynson shares waldies sentiment, by outlining the growth of the sBm over the past decade. twelve years ago sBm only had two large fpsos in operation, Kuito and espadarte. today we have 15 leased facilities in

erry Joynson, Director, proposals & technology Development at sBm offshore, explains the evolving dynamics in the fpso industry. onshore oil production is in slow decline yet world oil demand

owneD vs. LeaseD FPsos

a significant number of respondents believe that oil operators prefer to lease fpsos rather than own and operate one. with 69% of the respondents believing that this is the case

32.1%

the massive growth in oil fpsos is set to continue lNG fpsos will steal the limelight given that natural gas is the next big thing

67.9%

FPSO InduStry trendS

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with a high leverage and low cost of finance the return of investment would be very high, the tables have turned however and banks tend to extend less financing and with leverage being lower the cost of debt has increased, making it modec difficult to get a high return. therefore in this environment, oil majors look at the cost involved when it comes to the rate over a specific period of time and realise that it may perhaps be better to own the asset. Ultimately determining whether to

Why IS thIS So?

the rationale for using a leased versus owned fpso is relatively simple, explains Dr. roger Knight, from infield systems. the most important rationale driving the decision to buy as oppose to lease, comes from the particular nature of the field itself, how this relates to solutions and associated charges presented within the leased market, and whether the operator is able to fund the capital required to own an fpso. to use a home buying analogy, should an individual have a specific wish list for their new property, for example wanting 10 bedrooms and a revolving roof, this is unlikely to be found on the rental market. however, if the individual has enough access to capital, then they will be a then they will be able to fund this ambitious project themselves, he said. although many fpso vendors may prefer the leased model instead of the own and operate model, financing would seem to be the major stumbling block that prevents this from happening. the leased model is attractive when there is plenty of liquidity in the market, simply because operators will be able to access a lot of debt and be able to leverage the project and the pricing on the debt was very low.

lease or own an fpso boils down to the timescale of the field and how long the asset will be operating in the field. if the field is only going to last 5 years, and investment of $100 million is not required, and using something that is readily available would probably be better than building something from scratch.

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teekay

BottLenecks

quick, more often than not; this is most likely the case when the oil company has already procured most of the equipment for the fpso project. from start to finish, the contracting work to the actual installation in the field may take up to a year. a deep-water project on the other hand will be a more technically challenging project, in these cases; the beginning of contract work to the execution of the contract could take as long four years, making the type of work for each fpso very different. 9% with larger, deep-water fpsos, the 12.8% 29.5% contractors seem to take on a lot more risks because the epcs are fully responsible for the design related aspect of the asset. however, for a pure installation contract, a lot of the 16.7% risks are covered by others, because everything has already been designed and the epc only has the installation risk to be concerned over. for fpso projects, where there are multiple contractors involved, the interface issues could become very complicated and this could ultimately lead to delays. Understanding field specifications accurately subcontractor management commisioning maintanance and operations 32.1%

w
issues were

hen asked what part of the fpso chain poses the biggest bottleneck, respondents felt that the two biggest subcontractor management and

understanding field specifications accurately. with 32.5% and 29.1% of the respective votes, many in the sector think that these are the pressing issues that need to be overcome. while there were other issues that caused bottleneck issues such as commissioning, maintenance and operations and redeployment, it seems that they didnt require the same importance as subcontractor management and understanding field specifications accurately. perhaps heres why? although there are many engineering

challenges, contractors invest a significant amount into research and development to come up with solutions to these challenges, so the more technically challenging projects are seen as an opportunity rather than an obstacle. the turnaround times for some of the smaller shallow water fpso projects are relatively

redeployment

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3%

14.1% modec

11.5%

inDustry investment

26.3%

respondents are investing in turbines, compressors and engines. while 13.9% and 11.3% of the respondents have claimed that they will be spending on water treatment and injection as well as power automation respectively. for deep-water fields, the percentage of the total development costs is below the water line, an fpso is a large investment but the installation costs, the risers, the pipelines and the sub-sea trees is now more than the actual fpso. when placing pipelines into deep-water, the equipment that will go onto the seabed will cost more and the expertise is rarer so ultimately the deeper you go the more expensive the project will cost. water treatment / injection coating power / automation turbines, compressors, and engines mooring and riser systems

hats perhaps why the industry is continuing to actively invest in mooring and riser systems. our research has revealed that 45% of our respondents will be actively investing in mooring and riser systems, only 27% of the

45.5%

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Financing avenues in the FPso sector

projects. it seems that almost three quarters of those involved in our study feel that the economic crisis has made smaller players in the fpso sector very vulnerable. only 23.2% feel that the industry has had no impact as a result of the economic crisis, this could be because of the large order books that select companies have had prior to the economic situation reaching its crisis point or the significant cash reserves of these companies. typically the banks and the project finance teams, have been deeply involved in fpso financing, and

he recent economic crisis has revealed that its becoming increasingly difficult for contractors to raise finance for leased fpso

these assets have been typically financed under asset based financing schemes. when it comes to fpso financing there are typically very large transactions where there will be 5 15 banks involved in the financing of an fpso. what is very well known is that financial institutions have been weakened by the financial crisis which has spilt over to europe and is deeply affecting long-term financing capacity. in the past european banks have relied on the money markets in the United states, to refinance themselves in U.s dollars, but after 2008 this market disappeared. so the trend in europe today is for banks to reduce their activities in U.s dollars especially for

long term financing. for fpso players there will be a constraint on financing because banks are extending their project finance in euros but for the players who are involved in U.s dollars the banks are exiting the market creating a gap that will need to be filled by alternate financing schemes. the most recent trend to address this gap is the bond markets; there is also an opportunity for the export credit agencies (ecas) in terms of funding, which we have noticed with large scale projects in australia. the general consensus in the market is that we have yet to see the full effect of the financial crisis on the fpso industry and there could be several patterns developing because of these constraints.

4.5% 23.1% the economic crisis has had no impact the economic crisis has made smaller players in the fpso sector very vulnerable 72.4% others

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Bluewater

moNetisiNG offshore reserves with aDvaNcemeNts iN fpso techNoloGy

17-20 september 2012 | singapore expo
researched & Developed by

13th aNNUal fpso coNGress whats captivatiNG?

reFineD

an enhanced speaker profile for 2012 featuring Bumi armada (vp - fps), sevan marine (coo), petrofac floating production(coo), pNoc (ceo), woodside (Gm - production).

UNpreceDeNteD represeNtatioN from oil operators, vessel owNers, sUBcoNtractors aND fiNaNciers
carLos mastrangeLo, wr facilities maNaGer, PetroBras antonio caiLao, ceo, PhiLiPPines nationaL oiL corPoration

inventive

two exclusive site visits to sBms fpsos in singapore and technips production facility in Johor Bahru (malaysia).

enhanceD

a superior venue with an improved exhibition space in singapore expo.

DriLLeD Down

Dedicated Geo Updates on the fpso industry from Brazil, Nigeria, australia, india and china.

unveiLeD showcase of brand new technologies and

log on to www.fpsoasia.com for a full list of speakers and the full congress agenda or email enquiry@iqpc.com.sg or ring +65 6722 9388 to find out how you can be involved.

maarten van aLLer, coo, PetroFac FLoating ProDuction

Lars oDeskaug, coo, sevan marine

michaeL hamBLin, Gm proDUctioN, wooDsiDe energy

updates from technip, subsea7, aibel, aBB,wartsila, hempel.

DoNt miss the two eXclUsive site visits!

sBm offshores fpsos iN Keppel shipyarD, siNGapore asiafleX proDUcts - a techNip facility, Johor BahrU, malaysia