FPSO contract awards expected to surge

July 1, 2021
Rystad Energy expects FPSO awards to reach 10 units in 2021, with another 10 in 2022.

Offshore staff

OSLO, Norway – Τhe FPSO market is booming this year, with more contracts awarded in 2Q 2021 than during all of 2020. Rystad Energy expects FPSO awards to reach 10 units in 2021, with another 10 following next year.

Four FPSOs were awarded in 2Q and the analyst firm believes another four will be awarded before the end of the year. Including the two awards from 1Q, this will bring the total tally up to 10 FPSO contract awards in 2021 – more than triple the three awards from 2020 – signaling a rapid comeback in FPSO contracting activity, despite the COVID-19 pandemic.

The four FPSO contracts expected to be awarded before the end of the year include the Mero 4 and Parque das Baleias in Brazil, Limbayong in Malaysia, and Liuhua 11-1 in China.

Aleksander Erstad, energy service research analyst at Rystad Energy, said: “It’s not that contractors were out of business, there are currently over 20 FPSOs under construction, one of which is likely to start-up already this year. But after a weak 2020, the recent awards and the expected ones are doubling the pipeline, ensuring manufacturers will keep busy in the years ahead.

Petrobras is currently evaluating bids for the two Brazilian FPSOs, Mero 4 and Parque das Baleias. The company only received bids from one supplier for each of the FPSOs. For the larger unit, Mero 4, SBM Offshore was the sole bidder, while Yinson was the only player to bid for the smaller Parque das Baleias FPSO. The muted interest comes as the FPSO supply chain is nearing full capacity with several suppliers unable to take on new projects, the analyst said.

In Malaysia, Petronas is evaluating bids for the Limbayong FPSO. Contractors involved in the bidding process are Yinson, MISC, Sabah International Petroleum, and a consortium comprising Bumi Armada, MTC, and Shapoorji Pallonji.

China’s CNOOC is looking for a cylindrical FPSO to redevelop the Liuhua 11-1 and Liuhua 1-4 fields in the South China Sea. The FPSO will be built in China and is likely to involve COOEC, COSCO, and CIMC Raffles.

According to Rystad, another 10 projects are likely to be awarded in 2022. Most of the FPSO awards come from Latin America with four units bound for Brazil and one for Guyana. Angola and the UK are likely to see two awards each, and one is lined up for Australia.

During 2Q 2021, a joint venture between Saipem and Daewoo Shipbuilding and Marine Engineering (DSME) won a contract to supply the FPSO P-79 for the Búzios field in Brazil. The contract is valued at $2.3 billion with Saipem’s share at $1.3 billion and DSME’s share accounting for the rest of the total value. DSME will build the hull and living quarters while Saipem will cover the topsides. The FPSO will be a newbuild with oil processing capacity of 180,000 b/d, gas processing of 254 MMcf/d, and storage of 2 MMbbl. The project will also give a boost to domestic Brazilian fabrication activity as Petrobras requires a 25% local content share.

The contract for Equinor’s Bacalhau FPSO was also finalized in 2Q. On June 1, Equinor reached a final investment decision for the field development, triggering the full engineering, procurement, construction, and installation scope, which will be executed by MODEC. The company will also operate the FPSO for the first year. It has conducted the front-end-engineering-design and pre-investment on the FPSO under a contract signed with Equinor in early 2020. The FPSO hull is already under construction by Dalian Shipbuilding Industry Co. in China. Once completed, the FPSO is expected to be one of the largest in the world with oil processing capacity of 220,000 b/d, gas injection of 530 MMcf/d, water injection of 200,000 b/d, and 2 MMbbl of storage capacity.

In China, SK Innovation handed out a lease and operate contract to CenerTech for an FPSO to be deployed in the Lufeng 12-3 field. CenerTech will build the FPSO, then lease and operate it for a fixed period of 10 years. The contract is valued at RMB 4.43 billion ($684 million) with FPSO capex incurred by CenerTech estimated at RMB 2.41 billion ($372 million).

Petrobras contracted two FPSOs during 2Q. In addition to the P-79, the FPSO P-78 was contracted earlier in May. The P-78 was awarded to Keppel Shipyard under a turnkey contract valued at $2.3 billion. Keppel subcontracted the hull and living quarter scopes to Hyundai Heavy Industries for $762 million. The FPSO will have identical specifications as the P-79. Keppel will use its Brazilian shipyard BrasFELS on parts of the fabrication scope to fulfill the 25% local content requirement.

According to the analyst, the FPSOs P-78 and P-79 represent a change in Petrobras’ contracting strategy. Petrobras had been contracting all FPSOs under lease and operate agreements. The switch to turnkey contracting, however, opens up to a wider set of potential suppliers. The company made the move as the leasing market for very large FPSOs is nearing full capacity.