Over the past three years, the FPSO market has seen a recovery in awards for both new and redeployed units. A well-supported oil market since 2021 has boosted the feasibility of some assets, resulting in a surge of final investment decisions (FIDs). This uptick in FPSO demand is expected to continue in the coming years, with many developments set to take FID this year and next. With many orders for FPSO fabrication and modification, operators and FPSO contractors have, at the same time, diversified the contract types, aiming to improve project economics and share execution risk.

As yard activity has steadily increased, units coming off contract have created a fleet of idled FPSOs. These available units have prompted some operators to opt for a redeployed platform to develop their projects, especially in mature fields or developments with marginal economics. Redeployed units offer one primary benefit: a shorter lead time when suitable to the field. In Cote d`Ivoire, Eni opted to develop the Baleine field in three phases, with the first two phases employing redeployed FPSOs, allowing the operator to achieve the first oil within two years of discovery.

Among the redeployed units, most platforms were leased and moved to a new location following refurbishment and modifications. Around seven projects are expected to be awarded by the end of next year using existing FPSOs, some with pre-selected units such as Maromba, Polok and Avalon deployed in Brazil, Mexico and the UK, respectively.

Lead times at fabrication yards in Singapore, China, South Korea and Brazil have grown, both for converted and newbuild hulls and topside modules. The market for new FPSOs is more heterogeneous in terms of contracts, with turnkey engineering-procurement-construction (EPC) and build-own-operate-transfer (BOOT) awards increasing since 2018 when units were predominantly leased. The majority of these FPSOs are mega projects with oil and gas processing capacity exceeding 200,000 barrels per day (bpd) and construction costs exceeding $1.0 billion for conversion and $2.0 billion for newbuilds.

Competition among the growing pipeline of projects has led FPSO leasing companies to record their highest levels of backlog, with some contractors declining to participate in tenders with restrictive local content rules. This limited competition inflates day rates for leasing opportunities. In addition, supplier financing costs have ballooned both due to higher interest rates and a smaller pool of banks willing to finance oil and gas projects. Large operators are not subject to the same constraints with owned units, as many can draw from their substantial cash flow and balance sheet reserves.

To avoid delays and lower costs, several operators, especially major E&P companies with good financial health, have opted for owned units, sharing risks and investment needs for FPSO fabrication and installation. Demand has concentrated in South America with ExxonMobil’s developments in Guyana, the massive Buzios presalt projects for Petrobras and Equinor’s Raia and Bacalhau assets in Brazil. This trend will continue and will be closely followed by West African developments, leading to more operator owned FPSOs until activity subsidies and interest rates fall.