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DW Monday: FPSOs (1) Challenges in the FPSO Supply Chain

By June 30, 2014 November 28th, 2019 No Comments

DW MondayFPSOs play a key role in deepwater oil and gas production. A DW analysis of FPSO projects found cost overruns of nearly 40% and average project delays exceeding one year for some;“FPSO Industry Must Re-Think Supply Chain”. In response to this we recently brought together twenty companies from across the FPSO supply chain in a round table session to identify the challenges facing the sector:

Capital cost escalation: “ Where you do save is to look at the whole development, not just the production system” – Major E&P Company Variance in guidelines from operators: “There are so many standards and requirements that this drives the cost up considerably” – EPC Contractor Variance in regulations worldwide: “US regulation requirements in the Gulf are a driving factor behind cost increases” – Equipment Supplier Poor presentation of specification by operators: “Requirements are presented in stacks of documents. This is very difficult for contractors to deal with and makes the process side of the business much more expensive” – Major E&P Company Over-engineering and scope creep: “Scope creep happens all the time in every project. This may be necessary but it will always delay the construction process” – Shipyard Supply chain concerns: “It’s a highly complicated supply chain, [but] major clients that come to us understand the problems” – FPSO Leasing Contractor Local content requirements: “Changing of specifications [for] local content are major concerns. Local content is an understandable requirement but partners need to be consistent” – Offshore Contractor Contracting challenges: “Nobody else signs 15 year contracts. We don’t enjoy the upside when rates are high and operators complain when we demand higher dayrates at the end of the contract” – FPSO Leasing Contractor

The team also identified potential solutions to these challenges – which we will discuss in the next DW Monday. Please call or email if you would like a detailed summary of the findings from this engaging and informative industry round table.

R. Michael Haney, Douglas-Westwood Houston
+1 713 385 2588 or Mike.Haney@douglaswestwood.com