What Lies Ahead In The Months To Come?Tim HaidarSummer 2015

What Lies Ahead In The Months To Come?Tim HaidarSummer 2015

IN ASSOCIATION WITH

Despite the oil price downturn cycle we are currently experiencing, analysts

estimate that the floating production, storage and offloading (FPSO) sector is

likely to see between $80-$120 billion-worth of investment through 2019.

While that has been rounded down from previous projections of $160 billion over the same

time period, it still equates to the GDP of Angola dedicated exclusively to mobile

hydrocarbon production units.

Within industry, everybody has agreed that 2015 will be one of the most challenging years

in recent memory. Now that Q1 is firmly behind us, here are a few predictions that we think

will shape the FPSO industry in the next nine months...

FPSO Predictions For 2015

WHAT LIES AHEAD IN THE MONTHS TO COME?

DECELERATION OF MARGINAL FIELD DEVELOPMENT

The advent of the FPSO in the

late 1970s and its evolution

across the coming decades made

the monetisation of world’s

marginal fields a palpable

reality.

The recent drop in oil price has meant

that the only FPSO projects that are

absolutely guaranteed to come to first

oil are those that will still be

economically-viable around the $70

per barrel mark. To limit capital

expenditure, it is likely that even these

endeavours will be rolled out as

phased developments.

FPSO Predictions For 2015visit www.OilandGasIQ.com

RESTRUCTURING, REDUNDANCIES, PREDATION, CONSOLIDATION

So far in 2015 we have seen two mega-mergers on both the operator and

service provider side, with Halliburton’s takeover of Baker Hughes for

$34.6 billion and Royal Dutch Shell’s purchase of BG Group for $69.7

billion.

In the remaining three quarters of 2015, we will doubtless see the bigger players in

the FPSO arena cannibalise their smaller competitors.

In the quest to bring down capital and operational expenditures, headcount will be

shed in record redundancies and companies will be reorganised inline with lean

management principles.

FPSO Predictions For 2015

INCREASED FOCUS ON ASSET INTEGRITY AND

ENHANCED OIL RECOVERY (EOR)

When the price of a barrel of the black stuff dips below previously

profitable levels, it is only natural that the industry’s concerns point

inward.

Producing assets across the globe are hunkering down to ride out the storm by

concentrating on the core principles of production optimisation and life extension –

getting more from less as safely as possible.

Part of the drive towards higher production yields will revolve around tertiary

recovery to ensure the productivity of the mid-late stage lifecycle for FPSOs.

FPSO Predictions For 2015

THE PETROBRAS SCANDAL WILL LEAD TO A SINKING FEELING

Petróleo Brasileiro S.A., the semi-public Brazilian multinational energy

corporation - and operator of one tenth of the extant FPSO fleet has been

suffering seismic shocks to the system since March 2014.

The government investigation codenamed Operação Lava Jato (Operation Car Wash), uncovered deep-rooted and systemic corruption at the heart of South America’s largest

company and caused the breakdown of its corporate hierarchy. Petrobras lost $16.8

billion in Q4 2014 and its foreign credit rating slipped from Baa1 to Baa2, one of the

lowest investment grade ratings.

The development of Petrobras’s deep water pre-salt assets is reliant on its use of FPSO

units: the company had planned to award at least 14 new FPSO contracts over the next

three years. The ramifications of Operation Car Wash, combined with softening oil prices

have put into sharp relief its ability to fulfil these ambitions.

FPSO Predictions For 2015

STANDARDISATION WILL BECOME MORE THAN A BUZZWORD

Although it will be impossible to fully standardise a project based on the

bespoke needs of every situation, the FPSO industry will have to start

paying more than lip service to developing prototypical templates in

order to embrace time and cost-saving demands.

Understanding and redefining what standardisation actually means in the context of

components, equipment, and work activities will be critical for the sector to escape

the vortex caused by nose-diving oil prices and win in the upturn to come.

FPSO Predictions For 2015

COLLABORATION FOR INNOVATION

Times of conflict are usually the periods that see the most technological

advancement, and there is no doubt that the oil and gas industry has been

in the thick of battle for some months now.

We will see a lowering of the traditionally confrontational barriers that stymie the

sharing of information, as E & P rivals work together to find innovative solutions for

cost reductions without compromising on safety, quality, and regulatory requirements.

FPSO Predictions For 2015

IRAN TO ENTER THE FPSO FRAY

After the mollification of sanctions meted out to the Islamic Republic of

Iran since 2006, Western Asia’s most populous nation will turn to floating

units for the exploitation of offshore reserves.

The South Pars field, jointly-controlled by Iran and Qatar, holds 51 trillion cubic metres of

in-situ natural gas and approximately 50 billion barrels of natural gas condensates.

As Iran reached Phase 12 of 29 steps of development for the field, FPSOs will become an

integral part of this state-critical resource. As of January 2015, Petroiran Development

Company Limited (PEDCO) affirmed that a contract had been signed to purchase an FPSO

for exploitation of the liquid hydrocarbon layer.

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