RIO DE JANEIRO—The global FPSO market is projected to surpass US$30 billion by 2025, demonstrating the buoyancy of the industry, according to a recent Global Data report.

Renewed emphasis on reducing project costs, improving productivity and maintaining lower operating overheads are contributing to the growth of FPSO projects being sanctioned.

“The result is improved break-even levels for many of the planned FPSO projects,” the report said. “Oil and gas companies and the FPSO operators are driving cost discipline and integrating innovative strategies to increase efficiency at every stage of the project life cycle.”

Europe and Africa are set for a rebound in floater awards with numerous FPSO awards shaping up for final investment decision.

The report shows Africa with the second highest number of planned FPSO additions—14 by 2025. Angola and Nigeria are noted as key countries in the region, followed by Senegal, Ghana, South Africa, Tunisia and Mauritania.

Europe ranks third among the regions in terms of planned and announced FPSO additions led by Norway and the U.K. Australia is expected to lead the Asia-Pacific region, with five FPSOs planned by 2025, according to the report.

Overall, South America will continue to dominate the market with 30 planned FPSOs in the pipeline.

Brazil Drives Growth

The region, in particular Brazil, will be a key driver of the FPSO market over the next five years. Most of the investments will come from the Brazilian state-run oil company Petrobras, which accounts for about 90% of the local orders. The company’s 2019-2023 business plan includes six FPSOs entering operation by 2021. The contracts are part of the company’s planned investments of $105 billion by 2023.

Petrobras said June 19 it awarded a letter of intent for the supply, charter and operations of an FPSO vessel for the Búzios Field to Japan’s MODEC Inc. The vessel will be the field’s fifth FPSO.

On June 7, Petrobras named SBM Offshore as the contract winner to operate the giant presalt Mero 2 Field, ending fierce competition for the major FPSO contract. According to Petrobras, the FPSO will be able to link up to 16 wells and have the capacity to process up to 180,000 barrels of oil per day (bbl/d) and 12 million cubic meters per day (MMcm/d) of gas. Production is scheduled to start in 2022.

The vessel will join FPSO Pioneiro de Libra, dedicated to early production systems and in operation since November 2017; and FPSO Guanabara, the first unit planned for the final production system of the Mero Field, with production scheduled for 2021.

“At the end of the plan period, we will have two definitive production systems operating, which could add up to 360,000 barrels of oil per day,” said Carlos Alberto Pereira de Oliveira, Petrobras’ exploration and production executive director. “With the information already obtained in the tests being carried out, we confirm the high production potential of the Mero Field, which has an estimated reserve of between 3 and 4 billion barrels.”

Besides Mero 2, Petrobras intends to launch bidding for the Itapu, Marlin 1, Marlin 2, Integrado Parque das Baleias and Sergipe-Alagoas FPSOs.

Majors such as Royal Dutch Shell and the Norwegian Equinor will also have orders to meet operational requirements of its latest acquisitions in the Brazilian presalt.

In May, Shell announced the FPSO tender for the Gato do Mato presalt field in the Santos Basin, giving FPSO suppliers worldwide an opportunity.

“An invitation to tender for Gato do Mato was issued in Q2 2019 to a limited number of FPSO suppliers with proven experience in Brazil. At this moment, we are assessing market options, while still going through our exploration activity,” Shell said in a statement. “As per our recent experience in other countries, we are working with parallel workstreams to accelerate project delivery as much as possible.”

Gato do Mato is expected to begin production in third-quarter 2023 with a platform vessel with capacity for 90,000 bbl/d oil and 8.5 MMcm/d of natural gas. The production unit will have the capacity to store 1.6 million barrels of oil and must work in the area for 25 years.

Majors Eye Chinese Shipyards

As for the shipbuilding Industry, China and Indonesia are leading with projects under construction, according to the report.

“China is increasingly becoming a behemoth player in the international FPSO market,” Global Data said in the report. “Signs point towards it taking precedence in the global market due to its development of expertise and production advancement.”

That could worry Brazil’s shipbuilding industry. Due to recent easing of local content requirements, Petrobras and other majors are eyeing Chinese shipyards to build FPSOs, though Brazil leads global FPSO demand.

“The [FPSO] demand exists. However, Petrobras will not build its FPSOs in Brazil. Brazilian shipyards are being placed on the margins of this market for most of the projects, being limited to the construction of some modules,” said Sergio Leal, executive secretary of the Brazil National Shipbuilding Industry Union. “Even the issue of FPSO integration is not yet defined as some of them are being made in Brazil and others have begun to be made in China.”

Although Brazil is challenged to ensure competitiveness, the country’s shipbuilding industry is able to compete globally for oil companies’ contracts.

Brazil Cost—a reference to higher operational costs associated with doing business in Brazil, making Brazilian goods and services more expensive compared to other countries—is a reality, according to Leal.

“In the shipbuilding industry, there is a learning curve that allows productivity conditions to be achieved that can reduce costs and deadlines,” Leal said. “In Brazil, this learning curve was interrupted when our industry was achieving productivity rates compatible with the international market.”

Offshore