As we collectively recover from Covid, the need for offshore oil & gas field development has not diminished, and FPSO’s are still the preferred solution. Standardisation of design has been the big push to expedite the time to first oil for the likes of SBM and MODEC, but now we’re seeing that zero emission or green floating assets are on the drawing board.
Some operators are rethinking their energy portfolio, consolidating, and focusing on core assets, while looking towards a lower carbon footprint. Companies are challenging themselves to look at how they can positively align project design and supply chain with high-level ESG policies, which are driving investments and shareholder engagement.
Offshore windfarm projects have dominated investment discussions, courtesy of renewable energy incentives and falling technology costs. With impressive gigawatt (GW) goals being announced, then increased at COP26, 2021 could well be remembered as a transformative year for offshore wind as spending doubled compared to 2019 levels. Over 2 billion in new investment was reported in the US alone.
Offshore windfarm developments require a plethora of installation, maintenance, and support vessels, which should ideally be energy efficient and have lower carbon emissions. These vessels are typically of European design, along with the majority of the offshore windfarm infrastructure. The US only has (3) Jones Act Compliant vessels currently being fabricated for their market, while 100’s more purpose-built vessels will be required to meet global offshore windfarm project demand.
You could be forgiven for thinking this is the end of the road for oil & gas but rising oil prices, with speculation of $100+ barrel oil for a prolonged period in 2022, will lead to investment growth. Different financing models are being entertained, but with new discoveries and improved oil prices, financing is always there if there are stable and good terms. For shorter term redeployments, in unstable regions, in questionable fields, it becomes more challenging.
There will be caution ahead of any major capital commitments, supported by challenges in the global supply chain, leading to operators entertaining various execution strategies to ensure profitability. The contracting model still errs towards “most competitive”, which highlights emerging markets, opportunities for new players, standardisation of design, and a focus on high performing fields to meet oil demand that will strengthen through 2022 and into 2023.
Oil & gas demand will rise to meet the desire for reliable and economical energy. Unless consumers change their energy habits, oil & gas demand will steadily increase, especially from developing nations, while we bring online and transition to alternative energy sources.
Energy Maritime Associates recently estimated that 100+ FPSO projects are at least 5 years out from operation; 69 projects in the planning phase, 35 in the bidding/final phase, primarily bound for South America, Africa & Asia.
The development mix in the medium-term spans across mature markets that don’t need large FPSO’s, so are suitable for redeployment of an existing asset, and the new markets where the lack of local infrastructure leads to the FPSO being an obvious solution.
As we’ve seen before, ownership and execution strategy can change during the evolution of a project, but with FPSO’s being designed and operating for 25+ years, companies are planning for an offshore market to 2040 and beyond.
Author: Justin Hoffman