NOV, GE FPSO Agreement Could Drive Efficiencies
National Oilwell Varco Inc.’s (NOV) plan to partner with GE Oil & Gas to standardize the floating production, storage and offloading (FPSO) package could drive efficiencies, lower costs, and eliminate scope changes while accelerating the time to first oil and improve returns for FPSO operators, an industry analyst noted Thursday.
The companies on Thursday announced plans to offer an integrated FPSO topside package by early 2017. The new, combined platform will provide industry-leading topside systems with repeatable deliveries, scale economics and standardized interfaces, which are expected to reduce risk of construction delays and cost overruns for deepwater oil and gas customers, the companies said in a July 7 press statement. Additionally, the new platform will incorporate digital solutions, which will optimize performance and provide predictive analytics through the life of the vessels, enabling FPSOs to efficiently adapt to a wider array of operating parameters. GE Oil & Gas may also involve other GE businesses in the collaboration with NOV.
“We can materially improve deepwater production economics by industrializing the supply chain and standardizing complex interfaces between our complementary topside equipment,” said NOV Chairman, President and CEO Clay Williams in the press statement. “For the past year, we have quietly explored this new and better way to make floating production vessels and are excited about how this collaboration will change the industry and improve the economics of deepwater production development.”
The current industry practice is to bid on a component-by-component basis, said James West, senior managing director and partner with Evercore ISI, in a July 7 research note. West noted that NOV has been building out it FPSO offering over the last several years, increasing its revenue opportunity from $25 million in 2010 from cranes, hose reel systems, riser pool systems and mooring equipment, to over $150 million per package with the addition of turret mooring systems, flexible flowlines, risers and jumpers and processing equipment as of 2013.
“The company has separation equipment (oil, water, sand), but not power generation or gas compression, with the addition of these technologies from GE Oil & Gas helping NOV to execute on its strategy of standardizing the FPSO business like it did with drillship construction,” West commented.
Evercore does not expect FPSOs to materially drive new orders for NOV’s completion and production solutions segment before the deepwater rig market recovers by 2018 at the earliest. Instead, it sees the announcement as another example of an increasingly complex web of relationships emerging across the supply chain to lower the cost and improve returns in offshore developments.
West noted that only four out of a probable 15 FPSO projects were awarded in 2015, as orders dried up after first quarter, while seven FPSOs were decommissioned. Only two to four FPSO awards are expected this year, with 90 percent surveyed by the FPSO World Congress expecting a weak one to five order outlook and 10 percent expecting a moderate pace of six-to-10 orders for 2016/2017. He cited data from Energy Maritime Associates, which estimates 105 to 188 floating production systems orders accounting for $80 billion to $157 billion in global capital expenditures (CAPEX) from 2016 to 2020. FPSOs are expected to make up 45 percent of all orders and 60 percent of CAPEX, driven by demand in Brazil, Australia, Southeast Asia, the Gulf of Mexico and northern Europe.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.