Westwood Global Energy Group (Westwood), the specialist energy market research and consultancy, has released research estimating FPS contract awards will rebound to $13bn annually from 2021-24, underpinned by an anticipated average oil price of $60/bbl from 2022.
In the short-term, Westwood expects FPS engineering, procurement and construction (EPC) contract awards to reach a total of just over $5bn 2020 – a 59% decline from 2019’s ~$13bn – assuming a base oil price of $37/bbl in 2020. The new research is a 73% reduction compared to Westwood’s pre-COVID outlook.
1Q 2020 saw two key FPS EPC contract awards (Sangomar FPSO and Anna Nery FPSO [LOI in 2019]), accounting for approximately $2bn of FPS EPC value and 170 kbpd of additional liquids production capacity. Other key FPS EPC contracts still expected to be awarded in 2020, include Equinor’s Bacalhau unit and Petrobras’ Mero 3, accounting for over $3bn in EPC spend and 400 kbpd of additional liquid production capacity.
Mark Adeosun, Senior Analyst, Offshore at Westwood Global Energy Group commented: “While the impact of the pandemic has hit FPS EPC contract awards significantly this year, the industry is in a much better place than the downturn of 2016 based on order intake so far, as well as the healthy backlogs of FPS contractors stemming from 2017-2019 activity. Despite this, the overall impact of Covid-19 on the FPS market represents a step backward for an industry which had expected 2020 to be a bumper year in 4Q2019”.
Longer-term, over the 2020-24 period, probable FPS EPC contract awards are estimated at $56 billion – including 40 FPSOs, 9 FPSS and 7 FLNG systems. The outlook for the latter, however, looks increasingly difficult, as low spot prices and looming overcapacity threatens the attractiveness of potential future investments.
Adeosun adds: “Over the next five years, Latin America will account for nearly 42% of probable FPS awards – totalling an estimated $24bn. Brazil is expected to dominate investment, as international oil companies ramp up activity and Petrobras commits to the development of its pre-salt discoveries. Outside Brazil, Guyana will contribute two additional orders to the forecast in addition to the Liza Unity and the Prosperity FPSO that are currently being built in Singapore (Topsides) and China (Hull).”
The research has been developed using its PlatformLogix solution, which covers global fixed and floating production facilities with data on more than 13,000 units.
Read the latest issue of the OGV Energy magazine HERE.
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