There were more FPSO (Floating Production Storage and Offloading Units) contracts awarded, in the second quarter of the year 2021 than the whole of 2020! Norway’s biggest independent energy consultancy, Rystad Energy expects FPSO awards reaching a total of 10 units, this year. The company also noted silent interests, from suppliers for recent FPSO tenders. This cites a nearly-full capacity, with some suppliers being incapable of taking on new projects.
Furthermore, Rystad Energy eyes another ten FPSO orders next year (2022). Which, as the company states, is “a very healthy project line-up for contractors, effectively doubling their pipeline.”
Rystad, in a recent report, said, “Four FPSOs were awarded in the second quarter and we believe another four will be awarded before the end of the year. Including the two awards from the first quarter, this will bring the total tally up to 10 FPSO contract awards in 2021 – more than triple the three awards from 2020 – signaling a rapid comeback in FPSO contracting activity, despite the Covid-19 pandemic”.
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Mero 4 (Brazil), Parque das Baleias (Brazil), Limbayong (Malaysia) and Liuhua 11-1 (China) are the four FPSO contracts, which the company expects to be awarded before the year ends.
“It’s not that contractors were out of business, there are currently over twenty FPSOs under construction, one of which is likely to start-up already this year. But after a weak 2020, the recent awards and the expected ones are doubling the pipeline, ensuring manufacturers will keep busy in the years ahead.” said Aleksander Erstad, the Energy Service Research Analyst, at Rystad Energy
The company states, that the bids for the two Brazilian FPSOs, Mero 4 and Parque das Baleias are being evaluated by Brazilian oil giant, Petrobras.
The FPSO Supply Chain Is Nearing Full Capacity
Rystad said, “The Brazilian giant only received bids from one supplier for each of the FPSOs. For the larger unit, Mero 4, SBM Offshore was the sole bidder, while Yinson was the only player to bid for the smaller Parque das Baleias FPSO. The muted interest comes as the FPSO supply chain is nearing full capacity with several supplier unable to take on new projects.”
Petronas is currently evaluating bids, for Limbayong FPSO in Malaysia, a contract award is expected to be handed out before the year ends, says Rystad. MISC, Yinson, Sabah International Petroleum, and a consortium comprising of companies like Shapoorji Pallonji, Bumi Armada and MTC are the contractors involved in the bidding process.
China’s CNOOC is also looking forward to a cylindrical FPSO redeveloping the Liuhua 11-4 and the Liuhua 1-1 fields in South China Sea. The China built FPSO would likely involve COSCO, COOEC and CIMC Raffles, said Rystad.
Rystad expects ten more FPSO projects to be awarded in the year 2022, matching 2021. The majority of the FPSO awards come from Latin America. Four units bound are for Brazil, one for Guyana and two for Angola and the UK each. One is also lined up for Australia, added Rystad.
The Busy Second Quarter
A joint venture between Saipem and Daewoo Shipbuilding and Marine Engineering (DSME) has won a contract to supply the P-79 FPSO, which is to be deployed at the Buzios field in Brazil, recently.
The contract is worth approximately $2.3 billion, with Saipem sharing $1.3 billion of it, while Daewoo Shipbuilding & Marine Engineering (DSME) accounting for the rest. DSME will be building the hull, and the living quarters, while Saipem would be covering the topsides. The newly built FPSO will have an oil processing capacity of 180,000 barrels of oil per day (bpd), storage of 2 million barrels, and a gas processing of 254 million cubic feet per day. The joint project would be boosting the domestic Brazilian fabrication activity, as a 25% local content share is required by Petrobras.
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Equinor’s Bacalhau’s FPSO contract too, was finalized in the second quarter of 2021. With the company reaching a final investment decision for the field development on 1st June. Thus triggering the full engineering, procurement, construction, and installation scope. This would be executed by Modec, which will also operate the FPSO for the first year.
Modec has conducted the front-end engineering design and a pre-investment on the FPSO, under a contract signed with Equinor, in 2020. The FPSO hull is under construction already, by China’s Dalian Shipbuilding Industry Company. The FSPO is set to be one of the world, with an oil processing capacity of 220,000 bpd, gas injection of 530 million cubic feet per day, water injection of 200,000 bpd, and 2 million barrels of storage capacity, once completed.
SK Innovation, in China, has handed out a lease and operate contract, to CenerTech for an FPSO, which would be deployed in the Lufeng 12-3 field. The FPSO would be built by CenerTech, and then leased and operated by the company for a fixed period of ten years. The value of the contract is RMB 4.43 billion ($684 million), with an FPSO capital expenditure of approximately RMB 2.41 billion ($372 million), incurred by CenerTech.
In addition to P-79, the P-78 FPSO was also contracted by Petrobras in May. Which makes the FPSO contract toll of the company in the second quarter of the year, reach two. The P-78 was awarded to Keppel Shipyard under a under a turnkey contract worth $2.3 billion. The hull and living quarter scopes was then awarded as a subcontract to Hyundai Heavy Industries for $762 million, by Keppel. The FPSO will have specifications identical to that of P-79.
BrasFELS, Keppel’s Brazilian shipyard will be used by the company for fabrication, to fulfill the 25% local content requirement. P-78 and P-79 FPSOs represent a change in Petrobras’ contracting strategy, said Rystad.