Challenges in the FPSO Supply Chain: Round Table

By George Backwell
Monday, June 30, 2014
FPSO: File photo

FPSOs play a key role in deepwater oil and gas production. A 'DW Monday' analysis of FPSO projects found cost overruns of nearly 40% and average project delays exceeding one year for some. In response to this DW recently brought together 20 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 they will discuss in the next 'DW Monday'.

Douglas-Westwood's  earlier paper 'FPSO Industry Must Re-Think Supply Chain' is at: http://bit.ly/TIRrul

Source: DW Monday

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