Brazil energises global FPSO market

25 November 2016

Dozens of floating production, storage and offloading vessels are planned to commence operations within the next few years across the globe, with Brazil home to more than a third of them. GlobalData assesses the market in the country, as well as the developments being made in the world’s leading regions.

A total of 64 FPSOs are expected to begin operations across the world over the next five years, giving a strong push to offshore oil and gas production. However, sustained weak oil prices may discourage oil and gas companies from moving ahead with their final investment decisions, which may affect the starting up of several of the planned FPSOs.

South America is expected to see 26 FPSOs begin operation by 2019, the greatest number of any region. Europe and Africa are the other major regions in the world, with the expected deployment of 12 FPSOs each by 2019.

Brazil will drive industry growth due to the expected start up of 25 of the 26 South American FPSOs by 2019 - the other being in the Falklands. The country will see development of fields in the sub-salt and post-salt areas in the deep and ultra-deep offshore areas.
In Europe, the UK is expected to witness the start up of seven FPSOs by 2019, developing offshore fields in the North Sea. Norway will see deployment of three FPSOs, mainly for the development of the fields in the Barents Sea.

In Africa, development of deep offshore areas in Nigeria and Angola will drive the deployment of FPSOs in the region. Angola will see the deployment of six FPSOs by 2019 to develop fields such as Caril and Chissonga. Nigeria will get four FPSOs for the development of fields such as Bonga South West and Zabazaba.

In detail
Brazil has been at the forefront of the global FPSO industry, with the country already deploying 17 FPSOs in 2009-14. It has made hundreds of discoveries in its offshore region in recent years, especially in the sub-salt region, and FPSOs are a convenient and cost-effective way to develop the fields containing these discoveries.

Petroleo Brasileiro (Petrobras), Brazil's NOC, has the most aggressive plans for the development of the country's sub-salt hydrocarbon resources in the Santos and Campos basins, mainly through FPSOs. The company is planning a capex spend of $108.6 billion, or 83% of its total capex, on the E&P sector as part of its 2015-19 Business and Management Plan. Especially, it plans to prioritise oil production projects focusing on the sub-salt resources. As a result, Petrobras will deploy and operate more FPSOs than any other company in the world, with most located in the Lula, Buzios and Atapi fields.

However, Petrobras's plans to produce hydrocarbons from Brazilian offshore areas could be delayed due to allegations of corruption against the company. Energy firm Galp Energia said in March that four offshore projects in the Lula Norte, Lula Sul, Lula Oeste and Lula Extremo Sul fields involving FPSOs could be delayed by a year due to an ongoing corruption probe. Petrobras registered its biggest ever loss in 2014, partly due to the write-down resulting from the corruption allegations, which in turn resulted in spending cuts on future projects.

"Block 17 is a global benchmark in the deep offshore and represents a unique industrial adventure, with 15 discoveries and a very high level of production."

After Brazil, West Africa and Northern Europe are the next most-important regions. In West Africa, Angola is planning to start six FPSOs, followed by Nigeria and Ghana with four and two respectively. Many West African nations have their oil and gas resources in their offshore regions, and FPSOs are the most convenient way to develop the potential.

In Northern Europe, the UK's crude oil production has been declining due to maturing of the fields in its continental shelf. As a result, the UK Government announced fiscal incentives to stem the production downturn. These have had a positive impact and invigorated the oil and gas companies' interest for further development of the North Sea, including through FPSOs. Norway will deploy FPSOs, mainly in the Barents Sea, for the development of the greenfield projects such as the Goliat and Johan Castberg fields.

Recent developments in Africa
Tullow Oil suspended gas exports from Ghana's Jubilee Field to the Ghana Gas plant at Atuabo on 3 July 2015 due to technical issues with gas compression systems on the FPSO Kwame Nkrumah. This suspension led to the constraint of oil production to approximately 65,000 barrels per day (bpd).

Tullow mobilised a team of experts to rectify the fault and gas exports and full oil production were resumed by mid-August. Tullow will review its 2015 production forecast for Jubilee.

Total has achieved the significant milestone of producing a cumulative two billion barrels from its operated deep offshore Block 17, located 150km off the coast of Angola.

With the start up of the CLOV development, Block 17 has become Total's most prolific site with production of more than 700,000bpd. The group operates four FPSO units on the major production zones of the block: Girassol, Dalia, Pazflor and CLOV.

"Block 17 is a global benchmark in the deep offshore and represents a unique industrial adventure, with 15 discoveries and a very high level of production. Thanks to the commitment of our teams and a number of technological world firsts over the past 14 years, the production of Block 17 has continuously ramped up," says Arnaud Breuillac, president, exploration and production, Total.
"This milestone is a symbol of our strong position in the deep offshore sector. The group is already the leading deep offshore operator in West Africa and is using this expertise to grow in other regions: in Brazil through its participation in the Libra field, as well as in the UK with the coming start up of the Laggan-Tormore project in the deep offshore."

Total celebrated its 60th anniversary in Angola in 2013. In 2014, the group's equity production reached 200,000 barrels of oil equivalent per day (boe/d), coming essentially from Blocks 17, 0 and 14. In early 2015, its operated production exceeded 700,000boe/d, making it the country's leading oil operator.

Total operates Block 17 with a 40.0% interest, alongside Statoil (23.3%), Esso Exploration Angola Block 17 (20%) and BP Exploration Angola (16.7%). Sonangol is the concessionaire of the license.

The company also operates with a 30% interest the ultra-deep offshore Kaombo development located on Block 32. A final investment decision was made in April 2014 to develop Kaombo's estimated reserves of 650 million barrels via two converted FPSOs with a total production capacity of 230,000bpd.

Meanwhile, the Kizomba Satellites Phase 2 project in Block 15 offshore Angola has come on stream. Production started several weeks ahead of schedule, and the project came in significantly below the original budget.

Statoil holds a 13.3% interest in Block 15, which is operated by Esso Angola, which holds a 40.0% interest. Other partners include BP (26.7%) and ENI (20.0%). Sonangol is the concessionaire.

"The satellite production at Kizomba adds profitable barrels to our 220,000boe/d production from Angola," says Tove Stuhr Sjøblom, Statoil senior vice-president for sub-Saharan Africa.

Through the subsea infrastructure development of the Kakocha, Bavuca and Mondo South fields tied back to the existing Kizomba B and Mondo FPSO vessels, total daily production of Block 15 is expected to increase to 350,000bpd. Recoverable reserves from the Kizomba Satellites Phase 2 fields are estimated at 190 million barrels of oil. Kizomba Satellite Phase 2 is located approximately 150km off the coast of Angola in water depths of around 1,350m.

Erin Energy Corporation has commenced production from the Oyo-8 well located in OML 120, off the Nigerian coast. Erin Energy is the operator of the Oyo field and has a 100% interest in the block. Oyo-8, which was drilled in the third quarter of 2014 to a total depth of approximately 1,850m), was successfully completed horizontally in the Pliocene formation. It is located in approximately 300m of water and is producing into the FPSO vessel Armada Perdana. The well is expected to produce approximately 7,000bpd following clean-up and optimisation of choke size.

Segun Omidele, senior vice-president of exploration and production at Erin Energy, says: "Bringing this well on production is a milestone achievement for our organisation, and was made possible through the hard work and dedication of our entire team and our service providers."


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