In World Oil’s March article, Floating Production Developments in Frontier Areas – Positive Sentiment Indicates Busy Time for Contractors we discussed FPSO demand; reviewed prime frontier areas for FPS installation off Guyana, Mexico, and East and South Africa; and discussed the challenges and opportunities associated with field developments including oil price, complete project cost and local content requirements.
As the Covid-19 pandemic was just emerging at the time of publication, our view was that it would likely delay FPS financial investment decisions until more clarity on the virus’ global market impact was available. However, we reiterated that long-term market drivers remain in place and though some projects may be delayed, few would be cancelled.
Our subsequent article published in Offshore’s April edition, Pandemic, Falling Prices Take Steam out of Floating Production Market discussed FPS construction activity; leading operators and contractors; and took a more detailed look at FPS market impact from COVID-19 and the related oil price crash.
Despite the impact of the Covid-19 pandemic, our long term view of the FPS market remains, with new construction contracts expected to remain on hold, but not cancelled. Our view is based on the uniqueness of FPS assets. Unlike a mobile offshore drilling rig, or supply vessel, FPS units are typically designed for one specific field and are not standardized assets, making it difficult to have an oversupply.
In general, we expect sanctioned developments to proceed, however delays of 3-12 months may be incurred due to supply chain disruptions and efforts to delay capital expenditure. With oil companies slashing spending across the board we anticipate only the financially strongest companies will proceed with sanction of new long-term projects.
EMA recently authored articles that appeared in World Oil and Offshore magazines in March and April of this year, respectively. Each article provides readers with FPS market insights, analysis and commentary related to the current and future status. Prior to the global Covid-19 pandemic and oil price crash, 2020 was on track to be an exceptionally strong year for new project awards and ongoing construction in the Floating Production sector.