An estimated $10 billion of floating production systems (FPS) designed to explore offshore for oil and natural gas failed to materialize as the global economy began to derail last year, but a recovery in the sector should begin in 2010, energy consultant Douglas-Westwood said in a new report. Projects worth an estimated $46 billion total are forecast to begin ramping up through 2013.

Africa, North America and Latin America are expected to take 59% of the forecast global FPS capital expenditures (capex), said Alex Pearce, who authored the study. He estimated that 121 FPS facilities would be installed worldwide through 2013.

Brazil’s national oil company Petroleo Brasilerio (Petrobras), which has been a leader in FPS design for years, is expected to be the “biggest spender on FPS systems over the 2004-2008 period,” Pearce said. “Petrobras is also expected to continue this lead over the forecast period, although super majors such as Total, Chevron, Shell and BP are all expected to commit to significant FPS expenditure over the coming five years.”

Petrobras last year was given approval by the Minerals Management Service to develop the first floating production storage offloading (FPSO) facility in the deepwater Gulf of Mexico (see Daily GPI, April 30, 2008). The FPSO is to be built in the Cascade-Chinook area in the Walker Ridge region of the Lower Tertiary trend, which is 165 miles offshore Louisiana in 8,200 feet of water.

The sector’s top 10 operators by expenditure are seen accounting for 55% of the installations and 68% of the capex forecast worldwide through 2013, said Pearce.

“The turbulent nature of energy and financial markets that developed in the second half of 2008 has persisted into 2009 and has had a dramatic impact on the FPS sector,” said Director Steve Robertson. Producers and oilfield services companies “are reining in expenditure and delaying projects as they respond to lower commodity prices, constrained cash flows and to challenges faced in the global credit market.”

The situation has “improved somewhat in recent months,” he said, but “the current economic climate remains difficult. The oilfield equipment and services sector is inherently a capital- and asset-intensive industry, and its reliance on debt markets to fuel expansion has meant that many companies are feeling the effects of global financial constraints.”

Douglas-Westwood’s analysis of the FPS sector found that the “impact on this sector has been massive,” said Robertson. “To see $10.4 billion of anticipated orders this time last year for 2008-2009 not materialize is unprecedented. However, we are convinced that the long-term fundamentals for the sector are strong: the need to exploit reserves in deep waters, marginal fields and remote locations will undoubtedly increase as the offshore industry matures and floating production systems are a key enabling technology in these areas.”

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