Rystad Energy has said that global awards for floating production, storage and offloading (FPSO) vessels will likely be limited to a single unit in 2020, as exploration and production firms slash budgets and activity.
The company also believes that hit by the second industry downturn in five years, similar to the previous downturn, awards are set to recover next year, with seven projects likely to be sanctioned.
Rystad Energy is an Oslo, Norway based independent energy research and business intelligence company providing data, tools, analytics and consultancy services to clients worldwide.
Offshore Energy reported yesterday that Modec, a floating solutions provider for the offshore oil and gas industry, won the only contract so far awarded in 2020 and will supply a new built FPSO for Woodside’s Sangomar development in Senegal.
The vessel, which will be the first FPSO to operate in Senegal, will be supplied on a turnkey basis and feature topsides capable of handling 100,000 barrels per day (bpd) of oil and 130 million cubic feet per day (cfd) of gas.
“Rystad Energy estimates that the total greenfield capex for Sangomar phase 1 will be around $4.2 billion, Offshore Energy said. it said that for the remainder of 2020, Rystad does not expect to see any new FPSO contracts being awarded. “Over the last 10 years, only 2016 saw a lower level of activity when not a single FPSO contract was awarded,” the report noted.
However, from 2016 activity quickly rebounded with 27 awards in the three-year period from 2017 to 2019. “This time too, we expect to see a speedy comeback in FPSO sanctioning with seven projects expected next year, including Bacalhau and Mero 3 in Brazil and Payara (Prosperity) in Guyana”, the report quoted Aleksander Erstad, energy research analyst in Rystad Energy.
Aside from new FPSO contracts, three charter contract amendments were disclosed in the second quarter of 2020. The first contract amendment was for Altera Infrastructure’s (previously Teekay Offshore) Petrojarl Knarr, which has been on contract with Shell since 2015. The amendment extends the charter period from March 2021 to March 2022. Under the previous agreement, Shell would pay a penalty if they terminated the contract before 2025.
This termination penalty has been removed in return for a new production and an oil price tariff. The day-rate is also set to fall from March 2021 as low oil prices hurt the field’s profitability. It now seems likely that Shell will shut down the field a few years down the road. Liquids production at Knarr averaged 12,000 bpd in 2019.
The agency noted that in India, Bumi Armada and Shapoorji Pallonji Group received a notification from ONGC about their intention to extend the charter contract for the Armada Sterling FPSO. The seven-year fixed portion of the charter contract expired on April 19 and ONGC now has six annual extension options that can be exercised. The length of the current extension is not yet disclosed as contract formalizations have stalled due to the Covid-19 lockdowns in India.
Chibisi Ohakah, Abuja