Until 2008, there were many new speculative players planning to enter the FPSO market. By the time 2009 came around it all rather fell apart.
Small-time operations were financing from external debt providers simply because credit markets were the tightest that they had been in years. This all led to many of the new start-up and smaller players exiting the market shortly into 2009.
Those that remained and could weather the crisis are still active and are enjoying the resurgent economic upswing. Globally, monetary policy is loosening and we have seen activity expanding globally from East to West. This has changed the entire scope of the sector as it is now not uncommon to see projects in Brazil financed from Japan or projects in West Africa being financed from China.
Deepwater production is set to double and capex is expected to increase by as much as 179% by the year 2015, to a decent $205 billion. On the other hand, drilling and subsea processing emerging will result in a little more than US$74.6 billion for the sector by the year 2015.
As a result of the 2008 downturn and subsequent turn of fortunes in 2009 and 2010 we have seen a slight increase in scrutiny on the part of the private equity sector with respect to the FPSO market, this seems to be the right level of scrutiny.
Consequently, the market is now seeing balanced contracting regimes, which was forced in a way, by the new entrants to the market from the private equity side. Numerous interviews with dominant players in the industry seem to confirm this feeling and continue to reassure us that, on the whole, FPSO projects are returning to pre-2008 level and a turn of fortunes for the sector is imminent.
There was a material decrease in orders since 2009 but it seems that market has bottomed last year and there is an increasing share of the market which is being leased to FPSOs.
The deepwater horizon disaster is unlikely to impact the FPSO sector as the Gulf of Mexico accounts for a small part of the market and in the long term it seems as though growth will return as the FPSO market is set to reach US$16 billion by 2014.
Jason Waldie awill be speaking at the 13th Annual FPSO Congress. To register for 13th Annual FPSO Congress send an email to email@example.com or log onto www.fpsoasia.com for the complete agenda that will be covered at the 13th Annual FPSO Congress.