Saturday, 12 March 2016
Oil price slump shakes FPSO sector
THE prolonged decline in crude oil prices has started to shake the floating production, storage and offloading (FPSO) sector, which used to be touted as a sweet spot in the offshore oil and gas industry.
Bumi Armada Bhd’s ongoing issues with its Australian FPSO give the impression that other FPSOs could potentially face similar troubles.
The simple reasoning is that current depressed oil prices are forcing some oil field operators to shut down or shrink their production activities, and that in turn means using less service providers such as FPSOs.
UOB Kay Hian senior analyst Kong Ho Meng is of the view that some FPSO contracts under Yinson Holdings Bhd and MISC Bhd could also be at risk.
This is due the high production costs in the fields they operate in.
For Yinson, he says the company’s FPSO Allan is still on the job although the production cost of the field it is working at is US$72.5 per barrel of oil equivalent (boe).
“Yinson’s FPSO Allan is still contracted, despite low production volumes since 2011, and the company guided that the FPSO has redeployment opportunities,” Kong says.
For Yinson’s other FPSO contracts, the fields production cost is as low as US$2.2 per boe to as high as US$20 per boe.
For MISC, Kong says FPSO MAMPU 1, which is contracted to Ophir RSC for Vestigo and Scomi Energy, may face impairment risks. The production costs on the field could be around US$41 per boe.
But he says the impact would be lesser due to its capital expenditure being lower than US100mil.
Notably, Kong points out that the award of new contracts for the construction of FPSOs for this year would be very thin.
“There are still quite a number of FPSOs waiting to be delivered this year,” he says.
According data by Energy Maritime Associates (EMA), only four FPSO contracts were dished out last year, which were the worst in almost two decades.
This was less than the 11 and 12 jobs awarded in 2014 and 2013 respectively.