Floating production unit market recovery, orders to surge in the next two years

2018-08-14 09:00

After a dismal 2016 with zero orders, the floating production unit market finally saw a recovery in 2017. With rising oil prices, cost deflation, and increased standardization, orders for floating production, storage, and offloading vessels (FPSOs) and floating liquefied natural gas units (FLNGs) are expected to increase significantly by the end of 2020, with a potential total value of $25 billion. Brazil and West Africa will continue to be key markets.

Clarkson's recent report predicts 33 new FPSO and FLNG orders by the end of 2020, including 6 this year, 13 in 2019, and 14 in 2020. Additionally, there may be 5 new semi-submersible production units and 6 new self-elevating production unit orders.

Clarkson's data shows that of the 33 new orders by the end of 2020, FPSOs account for 76% and FLNGs for 24%. In terms of the potential total contract value of $25 billion, FPSOs account for 56% and FLNGs for 44%. Latin America (mainly Brazil) will see 10 new orders, while West Africa will have 8.

According to Clarkson's report, after zero new orders in 2016, the floating production unit market rebounded last year with a total of 8 new orders, worth approximately $6.5 billion. Most of the FPSO contracts signed in the past 18 months were projects delayed since the downturn in the offshore market.

To date, 5 floating unit orders have been received this year, all involving Chinese shipyards. These include contracts for the Shell Penguins FPSO development project in the UK North Sea, awarded to COOEC and Flour. Petrobras' Mero-1 FPSO contract was awarded to MODEC and its partners. COOEC also became the general contractor for CNOOC's "Marine Oil 119" FPSO for the development of the Lufeng 16-2 oilfield in the South China Sea.

Additionally, Energean of Greece awarded the FPSO contract for the Karish gas field development project in Israel to Sembcorp Marine, which subcontracted the FPSO hull construction to China COSCO Shipping Heavy Industry. MODEC received a contract to convert a VLCC into an FPSO for Petrobras' Sepia field's "Carioca" FPSO. The hull conversion will be handled by Dalian COSCO Shipping Heavy Industry, while the topside modules will be built by Keppel Offshore & Marine.

Despite the growth in the floating unit market, Clarkson still warns of potential threats to future contract growth, including oil price volatility, US shale gas exploration and development spending, project financing challenges, and uncertainty surrounding OPEC policy.

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