Archives for category: offshore project

Although some indicators seem to suggest that the offshore markets have now bottomed out, most segments of the ‘cradle-to-grave’ offshore fleet are still facing significant challenges, often due to persistent vessel oversupply. One more positive sector though has been FPSOs, which is largely project driven and which has been supported by a rise in FIDs. So what is the outlook for FPSO contracting to 2020?

For the full version of this article, please go to Offshore Intelligence Network.

Brazil’s offshore sector has faced various challenges in recent years but nevertheless still accounts for 11% of all offshore oil production, 20% of all ultra-deepwater fields and 23% of FPSO deployments globally. It also still has significant untapped potential, or at least so many international oil companies seem to think, if the results of the country’s most recent offshore block licensing rounds are any guide.

For the full version of this article, please go to Offshore Intelligence Network.

Shallow water field developments can often be overshadowed by complex deepwater projects involving MOPUs and subsea trees. Yet shallow water, fixed platform developments remain a key part of the offshore sector and a significant source of vessel demand in many areas. And with some notable fixed platform project FIDs coming up, a review of this sometimes neglected segment seems timely.

For the full version of this article, please go to Offshore Intelligence Network.

After three consecutive years of falling offshore project CAPEX, things were a little more positive on the project sanctioning front in 2017, with major developments such as Coral FLNG Ph.1 receiving FIDs and total global offshore project CAPEX rising by 44% y-o-y. Sanctioning sentiment is still well below pre-downturn levels, but the relative positivity seems to be holding, so what might be on the cards for 2018?

For the full version of this article, please go to Offshore Intelligence Network.

After an extremely challenging 2016, parts of the offshore sector had a less harrowing year in 2017. Oil prices, though volatile, trended upwards, offshore project sanctioning picked up and there was a sense that perhaps some charter markets were starting to bottom out. That being said, it was still another very challenging year for the offshore fleet and owners will certainly be looking for improvements in 2018.

For the full version of this article, please go to Offshore Intelligence Network.

Since the onset of the downturn in 2014 it has been a pretty bleak few years for the offshore sector, with the occasional chinks of light on the horizon often quickly clouded over. More recently there have been indications that things might be clearing up a little and so sentiment has improved somewhat. But it is worth recalling just how low the barometer has sunk in order to put these things in perspective.

For the full version of this article, please go to Offshore Intelligence Network.

Now that half the year has passed, a review of offshore project sanctioning might be timely. Activity has picked up in 2017, especially for larger projects with CAPEX allocations of at least $500m. The uptick in FIDs has coincided with improved E&P budget guidance from many IOCs. So oil price volatility notwithstanding, could this be an sign of generally improving prospects for larger offshore projects?

Large Projects On The Rise

Offshore field project sanctioning reached a peak of 120 FIDs in 2012. Since then, sanctioning activity has been under pressure from a range of factors, most notably the weaker energy price environment that has prevailed since 2H 2014. Indeed, oil company E&P spending cuts induced by the falling oil price in 2015 precipitated a 33% decline in FIDs that year. Larger projects (with an estimated CAPEX of at least $500m) have been hit the worse, with the number of such developments in 2016 to receive an FID down by 60% on 2012. In comparison, the number of smaller projects sanctioned in 2016 was down by a less severe 32% on 2012.

However, 2017 is (so far) looking rather more promising: 31 offshore field projects received FIDs in 1H 2017, of which 48% were larger projects. Among these were Coral FLNG Ph.1 ($7bn), Leviathan Ph.1 ($3.75bn), Liza Ph.1 ($3.2bn) and Njord A Upgrade ($1.6bn). FIDs have been stimulated by the higher (albeit volatile) oil price, as well as by successes in reducing offshore project costs (by around 30-40% on start 2014, on average).

Small Runs Rule

That being said, while it is true that sanctioning of larger projects seems to be on the rise, it is important to note that many such projects (including all those named above bar Liza Ph.1) were conceived pre-downturn and were on the verge of obtaining an FID in 2014. This implies that the recent uptick in large-project activity may not be sustainable, especially as the backlog of such projects continues to fall. Indeed, the history of start-up delays and cost over-runs at mega-projects such as Kashagan Ph.1 ($48bn) and Greater Gorgon Ph.1 ($55bn) had already prompted operators to rethink the viability of larger offshore projects even before the oil price downturn. Onshore US basins are also potentially problematic for offshore projects, insofar as they compete (quite effectively) for scarce investment dollars.

Efficiency Matters

As a result of these considerations, operators have been downsizing many of the other large-scale projects planned prior to the fall in the oil price. Browse is set to use two FPSOs instead of three FLNGs, for example, while Bonga SW “Lite” now entails an FPSO with a processing capacity 33% smaller than before. Many operators are also placing more emphasis on subsea tiebacks to existing facilities, instead of major new offshore hubs (even if this means lower production volumes). Adapting to the potential “lower for longer” oil price outlook thus seems to be a priority for many upstream players.

So although FIDs at larger projects have picked up, looking beyond the backlog of projects from before the downturn, such developments seem to be less in favour. Scratching the surface, small projects are at least an offshore outlet for upstream investment and in the long run, perhaps cost savings cemented post-2014 might make large projects more competitive.

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