• Thursday, March 28, 2024
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Soaring orders for FPSO stretches supply chain limits

floating production, storage and offloading vessels (FPSO)

Increasing numbers of orders for floating production, storage and offloading vessels (FPSO) appears already to be straining the supply chain, including shipyards in Asia, World Energy Reports’ July edition states.

Approximately 24 FPSO contracts are nearing critical decision stages and final investment decisions (FID) on these are forecast to generate more contracts than the supply chain can deal with. The report suggests these two dozen or so tenders are poised to reach contract awards over the next 18 to 24 months.

“Whether the supplier base is capable of taking on all of these projects within this time frame is an issue,” the report asserts. It adds that the growing backlog is already forcing major FPSO contractors to be increasingly selective in bidding on new contracts.

Eleven FPSOs are approaching FID in Brazil, which has become the leading location for FPSO placement, where Equinor, Karoon, Shell, and Petrobras dominate FPSO demand.
In addition to Brazil, FIDs look set to bring new FPSOs to Australia, China, The Falklands, Ghana, Guyana Malaysia, Nigeria and Vietnam within 24 months provided the supply chain can manage the volume.

There are 186 FPSOs currently in operation around the world, 43 of which are operating in African waters; this is a little under 25 percent of the total. Ten percent of all FPSOs are operating specifically in West Africa, with one FPSO in Ghanaian waters, one off the coast of Mauritania, two in Cote D’Ivoire, and 14 off coastal Nigeria.

However, the lack of clarity in fiscal terms that would eventually apply to offshore petroleum exploration and production licences have stalled some projects that require FPSO to operate. These include Total’s Ikike, Owowo, Bonga South-West, and Preowei projects. The final investment decisions (FIDs) of these three are expected to be made by 2020, with the first oil from Preowei scheduled for 2022. Others are the Zabazaba and the Etan fields which Eni/Agip is working on.

Recently, a bill at the National Assembly on adjustment of the Production Sharing Contract (PSC) in terms of royalty brought together stakeholders and lawmakers to deliberate on how to allocate costs and proceeds from offshore oil exploration and production activities among stakeholders with claims to ownership.

In this light, the international oil companies (IOCs) have resisted the Federal Government’s move to increase royalty for deep-water projects to 50 percent because doing business in Nigeria under such a fiscal regime would be difficult. The IOCs have also argued that aside from the 50 percent royalty, these companies also pay other taxes to the government.

Bayo Ojulari, managing director of Shell Nigeria Exploration and Production (SNEPCO), said projects should be competitive, warning that if they are expensive due to different local conditions, it will be difficult to attract investments into Nigeria.

“One thing I know is that we are not going to give Nigeria’s natural resources out too cheaply. But we cannot continue to treat the IOCs as if they have no alternatives,” Oladiran Fawibe, the chairman and chief executive officer of International Energy Services said in an earlier interview with BusinessDay