FPS Market Improvement Continues Into Third Quarter
The World Floating Production Systems Tracker Q3 2017 is now available and is a concise 20-page update document presenting Westwood’s latest view on the market. Capex for both installations and orders has increased 13% and 11% respectively compared to the Q1 edition, with orders reaching $41bn and installation expenditure totalling $57bn 2017-2021. This increase is driven by increased confidence in the sector and materially lower field development costs.
Phased FPS expenditure 2017-2021
- 2017 YTD has seen high-capex units that were ordered prior to the downturn, such as the P-66 and Armada Olombendo FPSOs, come onstream.
- Currently 31 units are in-build, a drop of 14% from 2017 Q2 due to the lack of project sanctioning
- Seven FPS units have been ordered YTD including the Liza FPSO and the Mad Dog Phase 2 FPSS. The remainder of 2017 should continue to see orders with high Capex units, such as the Libra and Sepia FPSOs in Brazil, expected to be sanctioned late in the year.
- Latin America will remain dominant in the sector with 32% of Capex and 33% of installations. The majority of expenditure will be for Petrobras fields in water depths >1,000m which were ordered in 2010 and are yet to be installed.
- Installation expenditure will be diverse with Africa, Asia, North America and Western Europe all forecast to have installation spend over $5bn.
- 2017 and 2018 will dominate installation expenditure (64% of forecast) driven by units ordered before the downturn.
- Installation Capex forecast by region and type
- Unit Installation forecast by region and type
- Order Capex Forecast
- Oil Price Sensitivity Analysis
- Comparison between reports – highlighting major news stories of the quarter
- Summary of new and expected 2017 orders and units onstream
Continuing to build on the positive start to the year, the last quarter has seen a number of new FPS units, such as the first FPSO for the Liza field, ordered. Other projects have also moved towards FID as operators seek to capitalise on lower pricing throughout the supply chain and replace reserves.
Continued low equipment and service costs have combined with re-engineering of field developments resulting in dramatically improved field economics. As a result, projects previously considered uncommercial while the oil price was high, such as Mad Dog Phase 2, are now being ordered, while others, such as Shell’s Bonga SW project are expected to be ordered over the forecast. This demonstrates a renewed confidence in FPS developments in both deepwater (where they remain essential) and in shallow water where they are viewed as a viable alternative to fixed developments.
Analysis is based on Westwood’s Sectors database which details more than 700 FPS projects that are updated and tracked daily. The World Floating Production Systems Tracker Q3 2017 is essential for anyone evaluating investment opportunities in the FPS sector, including growing firms seeking competitive advantage across segments, investment banks and advisory firms wanting to improve their understanding of the business and industry analysts seeking a competitive edge.
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