Floating production market poised for growth

Feb. 1, 2022
The investment forecast for offshore oil and gas sanctioning this year is north of $70 billion and includes up to 18 floating production units, compared to just nine in 2021.

The outlook this year for the offshore energy industry is promising with large-scale projects slated for installation and first production, and a healthy pipeline of greenfield projects nearing final investment decision. The lingering uncertainly from the coronavirus variants, combined with the widespread political rhetoric aimed at reducing oil and gas development, may continue to temper investment decisions. But for now, demand is rising for oil, gas, and renewable resources. This bodes well for all offshore industry stakeholders.

The investment forecast for offshore oil and gas sanctioning this year is north of $70 billion and includes up to 18 floating production units, compared to just nine in 2021. Many of the new floaters will be stationed off West Africa, Brazil, Guyana, and in the US Gulf of Mexico. Investments directed to floating offshore wind units is growing as well.

The floating production market is perhaps the most encouraging industry segment. A recent survey of Offshore reader confidence in the market in the coming 12 months returned with about 80% of survey respondents expressing positive sentiment (somewhat confident to highly confident) compared to 61% in late 2020. The annual Offshore-Energy Maritime Associates survey is conducted in December. A large shift was noted in those expressing high confidence, increasing from 14% to 27%. Those who were somewhat pessimistic dropped from 16% to 7%.  

Readers were asked about inflation, and 97% of respondents said they expect higher prices this year. Almost two-thirds of respondents expect a 5-10% increase in capex costs, while over 25% believe that inflation will rise above 10%. This is a significant change from last year, when 45% expected no inflation, including 31% that anticipated cost reductions.

Readers were asked about obstacles for growth, and political issues were identified as the greatest barrier. An example of this played out late last year, when Shell decided not to pursue investment in Cambo, one of the UK’s largest undeveloped offshore fields. The project had drawn opposition from environmental lobby groups and the government. The UK government also rejected Shell’s development plan for the HP/HT Jackdaw project.

The price of oil fell to second place in the list of obstacles for growth. This should not be a surprise, as at the time of this writing, oil prices had reached highs last seen in 2014.

FPSOs continue to lead as the type of floating production system with the most promising growth potential, according to the survey. Floating wind came in second, again reflecting growing interest for renewables. See page 12 for a full review of the survey results and a market analysis by David Boggs, managing director, Energy Maritime Associates. Also, for more information on floating production technology and prospects for oil, gas, and renewable energy development, we invite you register for Offshore’s inaugural Floating Energy Systems virtual conference. It will be held on April 5-7. 

Meanwhile, the new ESG Focus section inside this issue highlights the hydrogen market and a project that is using renewable energy to provide power to remote subsea tiebacks and equipment in place of subsea umbilicals. Start on page 40 for the coverage.