The number of FPSO leases set to expire in 2022 is significantly higher than the yearly average level of around three since 2015, with the potential of 30 units becoming available by the end of 2022, a new analysis from Westwood shows.
Westwood’s Global Floating Production Systems (FPS) report notes under a scenario where no contract extensions are taken on current leased FPSOs, 14 additional units would become available in 2022.
Alternatively, if all available extension options were taken, nine units would come off-contract adding to the 16 units currently awaiting upgrade or redeployment. Of those coming off contract in 2022, 36% are over 40 years old and are potential candidates for scraping.
Mark Adeosun, senior analyst at Westwood, said: “This outlook uncovers a risk for FPS lease contractors such as BW Offshore and Modec who have recently enjoyed resurgent EPC activity but are now facing potentially significant backlog and revenue issues in the operations and maintenance part of their businesses.”
However, the analysis also highlights upside potential for E&Ps sitting on marginal reserves. These operators could take advantage of the current rebound in oil prices and FPSO availability to accelerate project sanctioning and in turn enjoy more cost-effective field development.
“There has been significant growth in FPS orders since 2016 and that improved market sentiment has translated into operators revisiting projects previously stalled by the 2020 oil price crash. We expect to see up to 17 FPS awards, valued at around $18bn over 2021, up 72% on our Q4 2020 outlook,” Adeosun said.