Executive Viewpoint ///

A wave of change is coming to the offshore oil and gas production industry. Offshore drilling activity has reached historic levels, pushing to deeper water depths, with wells of increasing complexity. This trend is driving an unprecedented increase in demand for floating production units at a time when the production market is in a state of flux. Floating Production, Storage and Offloading (FPSO) operators currently face economic difficulties that challenge the existing business model. The difficulties in defining the scope and project budgets for an FPSO have resulted in cost overruns and longer delivery times, leading to a higher risk in the Lease and Operate contracts. Consequently, there is unexpected residual value on assets and a decrease in financial performance. All of these factors have combined to make it difficult for the operator segment to “lift” new projects and support the increasing demand. As such, there is an FPSO supply gap in the market today.

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