Review of 2018 - Part 1 - FPSOs
This review discusses the most important trends we followed in 2018 for the Offshore Oil & Gas industry, focussing specifically on floating production systems.
New FPSO Projects
A total of 10 new projects came onstream in 2018.
Brazil took top spot with 5 start-ups including 4 for Petrobras - P69 (the 2nd replica FPSO on the Lula field), P74 and P75 (2 generic conversions on Buzios field) and FPSO Cidade de Campos dos Goytacazes (MV29) a unit chartered from Modec for the TVM field. The fifth FPSO start-up in Brazil was Petrojarl 1 chartered by QGOP from Teekay for the Atlanta field.
Elsewhere, Total commissioned 2 new vessels – Kaombo Norte in Angola and Egina in Nigeria, and Inpex (with partner Total) commenced production of the Ichthys field in Australia.
Finally, BW Offshore had a successful year with first oil achieved on the Catcher FPSO in the North Sea, chartered to client Premier Oil, and the BW Adolo on the Dussafu and Tortue fields in Gabon, where BW is also the block license holder.
One common theme on these 10 projects is that many were badly delayed, and the average over all 10 projects between the planned and actual first oil dates was 18 months. BW Offshore did best, achieving least delays on their 2 projects. At the other end, P69 is over 3 years late, having had a planned first oil date in 2015.
The reasons for the generally very poor schedule performance in 2018 are varied, but include;
- Over-ambitious local content requirements, which exceeded local capacity. This was the case in Brazil, where the contractors selected for the series of 8 replica FPSOs were unable to deliver on time due to lack of local infrastructure, which caused Petrobras to reallocate some work to China part way through the project (P69 was completed by Cosco Zhoushan). In Nigeria, Total also struggled with the ability of local Nigerian contractors to deliver, leading to a major dispute between SHI and Ladol, and a one-year delay for the project.
- Underestimating refurbishment scope on a relocation project. Teekay and Damen shipyard struggled with Petrojarl 1 relocation, which finally took 2.5 years to complete due to scope growth after the vessel arrived in the yard.
- Massive project complexity, in the case of Ichthys, which required 5 major elements to be completed sequentially before first LNG was achieved – SURF, Semi Sub, FPSO, Pipeline and LNG Plant. Each of these was a major project in its own right, but stacking all together created serious project schedule risk.
Will we see a better result in 2019? At present we see 11 vessels due to start production during the year, of which 6 are again in Brazil, including 3 more replicas and 2 more generic conversions. These have suffered similar, or greater, delays to the units that started in 2018, so in general we don’t expect the picture to be much better in 2019.
It is also interesting to note that of the 10 vessels that started in 2018, 5 were new builds and 5 conversions, with 2 of these conversions being relocations of existing units.
Cessations
Five FPSO’s stopped production in 2018, all of which could be candidates for relocation (see below). These were Aker Floating Production’s Dhirubhai 1 which ceased production after a 10 year charter on the MA field in India, Modec’s MV 11 which stopped production on Exeter/Mutineer in Australia after 13 years, Woodside’s Nganhurra which was operating on the Enfield and Laverda fields in Australia for 12 years, Eni’s FPSO Firenze in Italy and Shell’s Curlew FPSO, which was operating in the North Sea for 21 years. Curlew is least likely to be relocated, due to the hull age and history.
This was a relatively low number of cessations, compared with the 9 vessels which ceased production in 2017, and at least 10 forecast for 2019. Higher oil prices in 2018 have probably led to more contract extensions than were seen in 2017.
Construction and Relocations
There are currently 26 FPSOs under construction (including 1 refit). Of these, 9 are for FPSO contractors, but 17 are for Oil Companies, of which Petrobras is the largest with 8 vessels. In terms of regions, Brazil is clearly the hot spot, with 11 FPSOs under construction, after which UK is next (3) followed by Australia and Guyana (2 each).
Only 2 of these 26 projects are FSPO relocations, being Aoka Mizu (Lancaster field, UK) and Petrojarl Varg (Cheviot field, UK). One more is a refit, returning to existing field after upgrade, being Ngujima Yin in Australia.
The pool of FPSOs available for relocation now stands at 29 vessels, 7 being owned by oil companies and 22 by FPSO contractors. The large FPSO contractors of Bumi Armada, Modec, Bluewater, BW Offshore and Yinson have 12 vessels available between them, with Modec and Bumi each holding 3 vessels on standby. On the client side, CNOOC is looking to redeploy 2 older vessels. We expect a significant proportion of new projects to be filled from this growing pool of relocation candidates.
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