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O shore Engineering, procurement and construction of ß oating production units is a small market in terms of number of units Ð but large in terms of revenue generation. An EPC contract for a production unit can easily exceed $1 bil- lion Ð and $3 billion for an FPSO has recently been breached. Overall, this is a $20 to 30 billion annual market. But, as de- scribed below, the sector is hitting some headwinds that could impact future business opportunities. Backlog of Planned Floater Projects 243 ß oating production projects are in various stages of plan- ning as of beginning May. Of these, 57% involve an FPSO, 16% another type oil/gas production ß oater, 23% liquefaction or regasiÞ cation ß oater and 5% storage/ofß oading ß oater. Brazil, Africa and SE Asia are the major locations of ß oating production projects in the visible planning stage. We are tracking 50 projects in Brazil, 49 in Africa and 46 projects in SEA Ð 60% of the visible planned ß oating production projects worldwide. Around 25% of the projects are at an advanced stage of development. They typically have either entered the FEED phase, pre-qualiÞ cation of ß oater contractors has been initi- ated or bidding/negotiation is in progress. Award of the pro- duction ß oater contract in these projects is likely within the next 2-3 years. The remaining 75% of the planned projects are in an early stage of development. Contract awards are more likely in the 3+ year time frame. Future Business Drivers The large number of projects at the ready-to-go stage is clear- ly a positive indicator for future ß oating production equip- ment orders. However, timing of the decision to proceed to contracting will be inß uenced by future underlying market conditions.Fundamentals driving future orders in the ß oating production market remain generally positive. World oil and gas demand continues to grow, crude pricing remains in the $100 to $110 range and deepwater drillers are operating at high utilization. But the sector is hitting competition from shale/tight oil and gas supply, energy companies have been cutting capital spending budgets and deepwater drillers are not quite as bull- ish as in recent past. Growing Demand for Oil and Gas On the positive side, global oil demand has grown at an aver- age rate of 1.4% annually over the past 20 years. With the exception of two years during the global Þ nancial meltdown, oil demand has increased year over year during this period. Growth in oil demand is widely expected to continue over the foreseeable future. The IEA, for example, sees world oil demand in 2035 growing to 101 mb/d, an increase of 11% over today. Global natural gas demand is also growing. Gas consump- tion doubled between 1980 and 2010 and has grown another 13% since. Over the past decade global natural gas consump- tion declined in only one year Ð 2009 as a result of the Þ nan-cial crisis. The EIA sees world gas consumption growing at an annual rate of 1.7% through 2040. ExxonMobil projects a 65% in-crease in natural gas demand by between 2010 and 2040.Impact of Unconventional Oil and Gas SupplyBut unconventional oil and gas resources are changing the supply landscape. Use of horizontal drilling and hydraulic Floating Floating Production Systems Production Systems The Outlook for The Outlook for New Orders New Orders By Jim McCaul, IMA By Jim McCaul, IMA Breakdown of Planned Projects by Type Production System Required (As of 1 May 2014) Type System RequiredNumber of Projects FPSO138OTHER FPS38FLNG31FSRU24FSO12Total 243May 20148 MTRMTR #4 (1-17).indd 8MTR #4 (1-17).indd 85/12/2014 10:12:12 AM5/12/2014 10:12:12 AM
