SBM Offshore’s holiday season brightened with the award of an FPSO contract for ExxonMobil Corp.’s (NYSE: XOM) Liza development offshore Guyana, giving a glimmer of hope for the ailing FPSO market sector.
ExxonMobil said Dec. 20 that it has selected SBM Offshore to carry out FEED work for the FPSO vessel that will be used at the Liza Field, which is estimated to hold more than 1 billion oil-equivalent barrels. If a final investment decision (FID) is made on the project, the company would also build, install and operate the vessel. Word on the FID is expected in 2017.
“We are proud that ExxonMobil has awarded SBM Offshore contracts for the Liza FPSO, starting with the front-end engineering, which forms an important part of a significant offshore development project,” SBM Offshore CEO Bruno Chabas said in a statement. “Our dedicated team is looking forward to cooperating closely with the ExxonMobil team to make this project a success. This award underlines the fact that experience matters across the entire FPSO life cycle.”
The contract is seen as a significant step in moving the fast-tracked Liza project forward. Plans include linking the FPSO to subsea umbilical, riser and flowline systems.
“Liza development activities are steadily progressing, and we’re excited to reach this important milestone,” said Neil Duffin, president of ExxonMobil Development Co.
Results of the latest appraisal well drilled—the Liza-3—boosted confidence for the play-opening discovery.
“Based on the positive results of the Liza-3 well, we now expect Liza to be at the upper end of the previously announced estimated recoverable resources range of 800 million to 1.4 billion barrels of oil equivalent,” John Hess, CEO of project partner Hess Corp. (NYSE: HES), said during the company’s third-quarter 2016 results.
The news is encouraging for the FPSO sector, where activity has drastically slowed.
“We have a very large market population of FPSOs available for these types of projects and they cost less than converting into an FPSO, let alone building a new one,” Caitlin Shaw, research director-upstream supply chain for Wood Mackenzie, told Hart Energy. “It’s one of the strategies that we’ll see some oil companies pursue. There will still be some who don’t want to tap into that [leased FPSO] market.”
Regardless, operators are evaluating creative ways to bring fields to development by tapping into the FPSO market, she added.
Shaw forecasts the number of floating production orders will rise in 2017 and 2018, which is needed “just by virtue of expanding and moving farther away from areas with production infrastructure in place whether that’s new, frontier areas like offshore Guyana or the Falkland Islands, or just going into deeper waters like we’ve seen in the Gulf of Mexico.”
Although the forecast points to growth ahead, Shaw cautioned that the rise will be a fraction of what the industry saw in the previous five years. Back then, Petrobras—a deepwater powerhouse—ordered a lot of FPSOs as it planned to develop deepwater fields, including in pre-salt layers.
The firm does not anticipate seeing trends at those levels going forward, Shaw said.
Spanning 26,800 sq km, the Liza Field is located offshore Guyana in the Stabroek Block.
ExxonMobil affiliate Esso E&P Guyana Ltd. is the operator with a 45% interest in the block. Hess Guyana Exploration Ltd. holds a 30% interest, while CNOOC Nexen Petroleum Guyana Ltd. has 25%.
RELATED: New Kid On The Block
RELATED: ExxonMobil: Well Offshore Guyana Confirms ‘World-Class’ Oil Discovery
Velda Addison can be reached at vaddison@hartenergy.com.
Recommended Reading
Russia Orders Companies to Cut Oil Output to Meet OPEC+ Target
2024-03-25 - Russia plans to gradually ease the export cuts and focus on only reducing output.
Global Oil Demand to Grow by 1.9 MMbbl/d in 2024, Says Wood Mac
2024-02-29 - Oil prices have found support this year from rising geopolitical tensions including attacks by the Iran-aligned Houthi group on Red Sea shipping.
Oil Rises After OPEC+ Extends Output Cuts
2024-03-04 - Rising geopolitical tensions due to the Israel-Hamas conflict and Houthi attacks on Red Sea shipping have supported oil prices in 2024, although concern about economic growth has weighed.
BP Starts Oil Production at New Offshore Platform in Azerbaijan
2024-04-16 - Azeri Central East offshore platform is the seventh oil platform installed in the Azeri-Chirag-Gunashli field in the Caspian Sea.
Oil Market Shifting Back to Supply/Demand
2024-03-08 - Stratas Advisors' John Paisie forecasts the price of Brent crude to increase during the second and third quarters of this year and move toward $90/bbl.