North America to feature heavily in FPS resurgence in 2016News // November 30, 2015
With a mere four orders so far this year the Floating Production System (FPS) sector is suffering. However, Douglas-Westwood (DW) says things are anticipated to be better next year, with the US Gulf of Mexico in particular, having a surprisingly bright future.
The area is expected to have as many orders next year as there were globally in 2015 and this positive upturn has already started with the Appomattox Floating Production Semi-Submersible (FPSS) being awarded in the third quarter, the most expensive unit ordered all year.
"A few years ago this would have been unthinkable, with interest in the deepwater Gulf of Mexico waning as numerous companies gave up their offshore acreage to focus on the shale market onshore," said DW. "Yet the declining oil price has, if anything, bolstered interest in the region. An employee of a major engineering company recently told DW of their surprise at how many tenders they were invited for in the region.
"This demonstrates the fact that the US Gulf of Mexico is an attractive investment area at a time of low oil prices, with field development approvals despite the low oil price.
"This highlights the appeal to operators of a well-established, politically stable investment climate and until the oil price improves, most frontier areas are likely to be ignored."
A crucial point found in DW’s new World Floating Production Market Forecast 2015-2019, fourth quarter update, however, was that units ordered next year will be significantly cheaper than those ordered before the downturn.
For the US, cheaper developments were already the norm due to smaller reserves, leading to a preference for ‘mini-FPS’ developments. The downturn has seen even these costs slashed with the Mad Dog Phase 2 development that was uneconomical at US$110 a barrel being ready for a final investment decision next year, after numerous front end engineering design revisions, despite the bleak oil price forecast.
Regardless, any upturn after a dismal 2015 will be greeted gratefully from the array of shipyards and suppliers who are hurting badly in the current environment.