Thirty years on from their first appearance, floating production, storage and offloading (FPSO) systems still dominate the offshore market, and are unlikely to relinquish their position any time soon.

Innovative technologies, coupled with developments of existing ones, have played a big part in maintaining this standing for so long – not least by enabling new possibilities for future projects to be considered. There would appear to be no imminent shortage of these either.

“More than $40 billion is expected to be spent on 123 floating production systems.”

According to a recent report by industry analyst Douglas-Westwood, in the period leading to 2012, more than $40 billion is expected to be spent on 123 floating production systems (FPS), with about 95 FPSOs – accounting for 80% of this capital expenditure (capex) – to be installed around the globe. This represents significantly greater prospects for the sector than the preceding equivalent period, which saw a total of 85 FPS units installed, and is anticipated to see particular growth in floating installations in Asia, Australasia, South America and Western Europe.

Global FPSO expenditure is largely predicated on whether fields are to be developed by redeploying or rehabilitating existing units, converting additional tankers or commissioning new-builds. Within the 2008-2012 window of the Douglas-Westwood “World Floating Production Report”, from a market value perspective, the forecast is that Africa, Asia and South America will make up about 66% of the anticipated global FPS expenditure.

In terms of actual installations, Africa and Asia are expected to account for nearly half of the 123 FPS vessels anticipated – 27 and 26 respectively.

Despite the similarity in unit numbers, their regional value is somewhat different. Africa’s expected capex has been put at $11.6 billion, reflecting the necessity of new-build and higher-spec vessels, which tend to be required in those waters.

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In the case of offshore Asia, the shallower waters and more hospitable conditions allow relatively cheaper solutions to be implemented; the capex is expected to be more than $4 billion lower.

Secrets of success

Part of the reason for the enduring hold of the FPSO approach on the market’s leading edge lies in its simplicity. An offshore production facility capable of accumulating and storing oil before periodically offloading it to tankers for transport to the mainland has obvious logistic and economic appeal.

Not only does this directly permit the rationalisation of shuttle tanker movements but, more fundamentally, it can also allow marginal oil fields, or those in deepwater areas at some physical distance from existing pipelines, to be developed. For the former, their ease of redeployment once economic viability is exhausted is the key, while for the latter, the cost of de novo submerged pipelines is obviated.

However, much of the secret of FPSO success lies in technological innovation. The era of floating production began in 1975, when a converted semi-submersible drilling rig – Transworld 58 – was deployed as the world’s first FPS on the Argyll field in the North Sea, offshore UK.

Two years later, the first oil FPSO appeared on the Shell Castellon field, operating in 117m of water in the Spanish Mediterranean. Since then, the concept of floating production has blossomed, with the arrival of tension leg platforms (TLPs) and spars to add to the original floating production semi-submersible (FPSS) and FPSO fore-runners.

Nevertheless FPSOs have made the greatest inroads and, accounting for 63% of all FPS installations, they remain the dominant force in the global floating production landscape.

Technology advancements since their inception have seen the arrival of a host of features, from geostationary turrets to allow the vessel to turn and ride prevailing weather, to the wider inclusion of water or gas injection and gas-lifts. In November 2006, plans by Petrobras were approved to bring FPSO to the Gulf of Mexico for the first time – on the Cascade/Chinook project in Walker Ridge, in about 2,500m of water.

The development plan calls for the application of a series of technologies new to the region – including a disconnectable turret, subsea electric pumps, free-standing hybrid risers and a mooring system made from polyester.

A year later, in 2007 – with nearly 190 FPSO systems installed worldwide and the role of oil FPSO firmly established – the first LNG carrier conversion to an LNG floating storage and regasification unit was carried out at Singapore’s Keppel shipyard. Recently, concept designs for full LNG FPSOs have also been advanced to produce, store and periodically offload LNG, natural gas or condensate.

The Norwegian company Flex LNG expects its purpose-built vessels – on order with Samsung Heavy Industries – to be producing LNG by 2011, liquefying natural gas with deck-mounted nitrogen expander liquefaction cycle trains.

The technological developments that have cemented the position of FPSO to date remain a powerful guarantee of its continued popularity but there are a number of contingent factors that have formed drivers on its success.

Circumstance and happenstance

The circumstances within the wider offshore industry itself have provided some of the impetus for the continued growth in demand for FPS in general, and FPSO in particular. The gathering pace of expansion unfolding in the uptake of subsea production technologies has been instrumental in this, as has the trend towards operations in deeper waters.

Added to this, economic pressures have altered the perception of marginal fields – and prioritised maximising the extraction from maturing ones – while there has also been an upsurge in interest in fast-tracking projects and phased delivery programmes.

“Economic pressures have altered the perception of marginal fields.”

Part of the reason for the rapid expansion of the global FPSO fleet lies in the rising demand for drilling units that has arisen as a result, which has led a significant decline in recent years in the numbers of semi-submersible rigs available to be converted to FPSS. Conversely, changes to international regulations on maritime pollution will soon make all single hulled tankers obsolete in their original role.

The opportunity to reuse these effectively depreciated assets is a strong incentive to refit them as FPSO vessels. Accordingly, such conversions are expected to make up more than half of the prospective units forecast for deployment around the world in the next five years.

Opening new markets

With the first FPSO installation in the Gulf of Mexico poised to begin production 265km offshore Louisiana in 2010, technological development again stands on the brink of opening this new market – which has historically been wary of the approach. Many eyes will be on how well disconnectable FPSO performs here, as the Gulf’s deepwater and ultra-deepwater industry continues to look for ways to avoid inherent climatic and economic risks.

In August 2005, Hurricane Katrina damaged or destroyed 30 oil platforms, caused the closure of nine refineries and slashed production in the region. The appeal of being able to simply disconnect, avoid damage and then restart production swiftly is clear.

However the necessary systems have not come cheap, since expensive riser towers or hybrid risers were the only choice for deep and ultra-deepwater FPSO applications. With the advent of technologies such as the recently announced MoorSpar system from SBM Atlantia, all that is changing.

Using lower-cost, higher-efficiency steel catenary risers (SCRs), this new-generation of disconnectable mooring could pave the way for significant FPSO in-roads to the Gulf’s developments – either as long-term solutions or during production start-up. If so, given that projects in the Gulf of Mexico can have relatively short lead times, the area’s predicted activity for the period to 2012 might end up looking conservative.

FPSO’s dominance is nowhere near being over yet.