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In April of 2015, 90 senior FPSO decision-makers from oil companies, vessel contractors, shipyards and other stakeholder groups sat down to discuss the most pertinent issues facing the industry at the FPSO Roundtables Dialogues.

FPSO Roundtables Dialogue Post-Show Report

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Here’s a snapshot of the key points raised at this year’s event:

Addressing rising costs for FPSO projects Oil companies now expect much higher operational time [97-98.5%] which results in much higher costs.

Value engineering is a valuable tool for saving costs, since 35% of the FPSO costs go on the topside. It’s a critical upfront investment that cuts expenditures.

Commissioning costs are also a serious concern. How can we control these? Is it really necessary to test all systems before sail away? Can we have a robust discussion around commissioning ahead of time?

Risk sharing, uptime requirements and flexibility on specifications during FEED have the most impact on costs.

To deliver a low-cost FPSO, we need to be discussing requirements and specification matters right at the start, at tender.

Enhancing the contracting process No matter how low the oil price, there’s always a contractor who is willing to jump in and give it a try. That new player will then mess up the project and the oil company will then try someone else, but they will expect to pay a similar price to the risky contractor. This is damaging the industry and holding back the standardisation of contracts.

Some players might lowball contracts and then once they win, start going over budget on purposely. One tactic is to withhold important documents until the 11th hour so to pressure their client into going over budget. It’s almost a business model some players are using.

What about the bidder selection process, will this survive? Being sucked into design competitions takes up resources and costs. Sometimes some of the costs are reimbursed, but not always.

From the oil operator’s point of view, players need to speak about the win-win reasons behind change orders. The only issue is that when a client wants a change because they originally underestimated the cost, that’s when the problems arise.

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Strategic procurement for FPSO projects 75% of CAPEX is in the hands of the supply chain, which means that having a good relationship with suppliers is essential.

Local content affects your procurement strategy, since the selection of shipyards and long lead times are affected by local content considerations. The big question then is how do you integrate local content with your procurement strategy?

Why are oil companies remaining stringent on their own international codes and standards? One oil major at the table commented that there is currently a huge push internally to reduce specifications. Furthermore, when it comes to procurement, they are working to find innovative solutions to share risks, local content and standardise certain specifications.

Analysing the latest oil prices and what this means for the bankability of projects When a bank finances a project they are not taking a risk on the price of oil, the price is contracted. The contract should protect the bank, it’s really about counterparty risk and reservoir risk.

One of the most important things banks look for in contracts is termination rights for the lease. They must be fair and unambiguous.

There is continued appetite for financing despite the drop in the price of oil. However, banks want to see decent contracts with strong counterparties. Who you are contracting with and the strength of the contract is going to be vital moving forward.

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Simplifying topside design and engineeringto justify project economics One of the gaps is that the operations guys have lots of experience using the equipment, but getting their experience back into the design is very tricky. In our experience when operations gets involved, schedules get pushed back and costs go up.

Lessons learned are useless unless they feedback into the design. You can try to look at the operations and design feedback, but if you did you will find yourself with 16,000 lines of notes. There are some areas of construction where you can be flexible and others where you cannot. For this reason there needs to be an understanding between the yard and designer, to understand why things are being done the way they are and vice versa.

We see complexity increasing in control systems and software support, especially for brownfields. We also see that the documentation for these solutions is incomplete. The systems are meant to make things seamless, but some providers go out of their way to ensure that you have to go back to them for help. They give you just enough information to run it, but not enough to run it yourself forever. The added problem then is that they tend sell off parts of their business so they no longer have the expertise available to help.

From the shipyard’s point of view, there must be some standardisation. When doing redesign a lot of resources and costs are necessary.

FPSO industry decision-makers will reconvene in Singapore at the 3rd FPSO Roundtables Dialogue on April 15, 2016 to discuss the project outlook for 2016-17 and strategies to propelling robust and cost-effective projects forward amidst the current market reality.

WANT TO BE PART OF THE CONVERSATION? Find out more or request an invitation by visiting our website or call +65 6722 9388 to see if you are qualified to attend.

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