Paula dittrick
Senior Staff Writer
The offshore oil and gas industry has long envisioned floating production, storage, and offloading vessels (FPSOs) working on deepwater Gulf of Mexico oil fields. This still has yet to happen, although Petrobras America Inc. stands ready to use an FPSO in the gulf.
BW Offshore installed the FPSO BW Pioneer to handle production from Cascade and Chinook fields in the Walker Ridge area 180 miles off Louisiana. Production was expected in early 2011. BW Offshore will operate the FPSO for Cascade-Chinook development operator Petrobras and partner Total E&P USA Inc. Shuttle tankers will transport the oil. The BW Pioneer is moored in 853 ft of water.
FPSO owners and contractors face uncertainties going into 2011, FPSO consultant Peter M. Lovie told IBC's floating production systems (FPS) conference in London last month. He previously worked for FPSO contractors and also worked for Devon Energy Corp. before it slashed its deepwater gulf exposure. Devon was a partner in Cascade field.
Lovie is cautious about the near-term FPSO business. BP PLC is selling assets following the deepwater Macondo well blowout in the gulf. Separately, Royal Dutch Shell PLC plans to divest some of its FPSO-based developments worldwide, Lovie said. Changing ownership will delay developments of these fields.
"The Macondo spill logically indicates it may not make…an immediate difference on FPSO business, but who knows the minds of the oil companies in looking at their capital allocations and how much they want to put off spending for a bit," Lovie said.
Idle FPSOs
He reports "a disquieting sign" in the number of FPSOs without contracts. As of December 2010, Lovie counted 15 available FPSO candidates compared with a working fleet of 152 FPSOs. Of the 15, 3 were incomplete FPSOs at shipyards that had been started on speculation, 8 were idle or about to be idle, and 4 had owners and were expected to be on the market soon.
"Each oil field is different, and each FPSO may need more modification and far more investment for the next assignment than typically happens with a drillship or a semisubmersible," Lovie said. Operators might find it cheaper to build an FPSO than to adapt an idle FPSO, he said, noting that shipyard and service rates plunge during economic downturns.
FPSO spec builds generally haven't worked out, resulting in a couple FPSO suppliers going bankrupt, Lovie said. He believes spec builds represent too much of a niche business.
"A spec build is a very risky business in the FPS world, don't do it," Lovie advocates. FPSOs tend to be field specific and are hired for the life of a field. Spec mobile offshore drilling units can be used on many wells in numerous locations worldwide during a 3-5 year initial drilling contract.
Nexus 1
Spec FPSOs have "struggled against the effects of a much thinner market than MODU speculations in the same era," Lovie said. "It is relatively rare to find a field development where the FPS spec build is right on availability, matching the timing for the operator's decision making and has the right specification."
Nexus Floating Production Ltd. started to build its harsh environment FPSO, the Nexus 1, without a contract. Nexus Floating Production had trouble finding a buyer, reportedly selling it at a loss to Brazilian EBX's unit Centennial Asset in 2009.
"Deflating values in 2009-10 was a trap for the likes of the Nexus 1 spec build." Despite a good basic design and builder, no oil company had a project available for which the Nexus 1 fit.
Nexus Floating Production put its Nexus 2 plans on hold until a customer is found. Lovie said MPF Corp. Ltd. provides another example of an incomplete spec.
The company started to build a multipurpose floater having the combined capabilities of a drillship and FPSO. But MPF Corp. filed for Chapter 11 bankruptcy when the MPF 1 was partially built.
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