The United Arab Emirates (UAE)'s chances for taking on some of the world’s future floating production and storage offloading (FPSO) vessel construction are diminishing as the global market looks set to stall for at least five years, with local demand for floating facilities little better, Abdelghani Henni reports.
In a conference session in the Abu Dhabi International Petroleum Exhibition and Conference’s (ADIPEC) first marine and offshore zone this past November, the prospects for floating production facilities were discussed, both in terms of potential for a construction market, but also the local and global market.
Panelists at the event said that the Middle East region is well positioned to better serve the FPSO construction market, due to its geographical location, offering optimal delivery time, and travel distance to key markets in Africa and South America.
“There are several opportunities for FPSO construction and modules construction in the region mainly in the UAE, as it offers competitive advantage compared to other locations in the Far East,” said Ajith PJ, technical director at ARIES.
Panelists at the conference also said that FPSOs are being considered for potential future projects in the Red Sea and Arabian Sea, due to the deep water nature of the area. According to Joe Brincat, regional vice president at ABS, there are already small numbers of FPSO in these areas. But, with Saudi Aramco scaling back its Red Sea exploration work earlier 2015, the prospects for future development there are currently slim.
Meanwhile, operators in the Persian Gulf, have opted for the construction of artificial islands instead of using FPSOs or fixed facilities. “The market in the UAE is not great for FPSOs as the Arabian Gulf is a shallow water [sea], and it is difficult to operate an FPSO here,” said Saif al-Hebsi, senior vice president–offshore services at Esnaad-Adnoc Group.
Al-Hebsi said that FPSOs are very expensive to deploy, especially amid the current low oil price environment. “In Abu Dhabi, we prefer establishing artificial islands rather than deploying an FPSO, as it is cost effective, and we try to use the artificial islands in the best possible way as it is the case with the ongoing projects at Zakum Development Co. (Zadco) and Abu Dhabi Marine Operating Co. (ADMA-OPCO),” he added. “Overall, FPSOs are very expensive and doesn’t meet the current market situation.”
The Upper Zakum oilfield, 84km northwest of Abu Dhabi, is the second-biggest oilfield in the Arabian Gulf and comprises four artificial islands with associated drilling and production facilities.
Commenting on the future of FPSOs and deep and ultra-deep offshore development projects over the next five years, panelists were pessimistic. “I don’t think there will be more deep offshore and ultra-deep offshore projects till the next five years, due to the current low oil prices,” said Fazel Fazelbhoy, CEO of Synergy Offshore FZ LLE.
Fazelbhoy also said that companies should take the current situation as an opportunity to gain more business rather than keep complaining. “Players who have good relationship with clients are trying to use this specific relationship to get business and increase the number operating vessels,” Fazelbhoy said. “They are offering reduced rates and try to be more efficient in executing their jobs in order to stay competitive and at the same time make some profit,” he added.
In addition, vessels operators are also reducing their offering prices in order to be able to compete, and at that the same time, try to slash fuel consumption to help reducing cost. “Companies with small fleets are suffering more from the current situation,” said al-Hebsi. “Next year is set to be tougher for vessels operators,” he added.
Image: Saudi Aramco
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