FPSO License Expiry Wave Could Help Marginal Field Operators
A record number of floating production, storage, and offloading (FPSO) vessel licenses are set to expire in 2022, according to a new analysis from Westwood Global Energy Group.
The market research and consultancy firm’s recent Global Floating Production Systems (FPS) report finds that as many as 30 FPSO units could become available by the end of 2022 as their leases expire – a potential tenfold increase compared to the average of approximately three expirations since 2015. Westwood noted that its FPS report finds that 14 additional units would become available next year under a scenario where no contract extensions are taken on current leased FPSOs.
In an alternative scenario where all available extensions are taken, the report concludes that nine units would go off-contract and add to the 16 units currently awaiting upgrade or redeployment. Westwood pointed out that 36% of FPSOs coming off-contract next year are at least 40 years old – potential candidates for scrapping.
“This outlook uncovers a risk for FPS lease contractors such as BW Offshore (FRA: XY81) and Modec (TYO: 6269) who have recently enjoyed resurgent engineering, procurement, and construction activity but are now facing potentially significant backlog and revenue issues in the operations and maintenance part of their businesses,” remarked Westwood Senior Analyst Mark Adeosun in a written statement emailed to Rigzone.
According to Westwood, the report also reveals a potential upside for exploration and production companies holding marginal reserves. The consultancy explained the operators could take advantage of the current oil price rebound and FPSO availability to speed up project sanctioning and develop marginal fields more cost-effectively.
“There has been considerable growth in FPS orders since 2016 and that improved market sentiment has translated into operators revisiting projects previously stalled by the 2020 oil price crash,” commented Adeosun. “We expect to see up to 17 FPS awards, valued at approximately $18 billion over 2021, up 72% on our Fourth Quarter 2020 outlook. This underlines the importance of near real-time data and analysis when market dynamics are moving rapidly to ensure you stay ahead of the competition.”
Westwood stated that it created the Global FPS report using production facility data from its PlatformLogix product.
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