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Leased FPSOs – a more effective way to cut capex?

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Report summary

New-build purchased FPSOs have been used by the Majors and NOCs for their mega offshore developments. But with costs for new-builds remaining robust, other development options like leased FPSO conversions are now being considered. Leased FPSOs tend to deliver improved rates of return. In addition, upfront capital is lower and ownership risks are carried by the FPSO contractor. But using a leased FPSO does not always translate to material increase in value. For large developments, operators can benefit from economies of scale and go for vessels that can optimise production and value. However, in this current environment, the simpler and cheaper VLCC option seems more attractive, but may result in a sub-optimal development.

What's included

This report contains

  • Document

    Leased FPSOs – a more effective way to cut capex?

    PDF 1.36 MB

Table of contents

    • FPSOs: a mix of new-builds and conversions in operation
    • Costs for new-builds have remained resilient
    • Change of strategy by Petrobras – Libra FPSOs will be leased
    • Leased vs owned: NPV vs IRR?
    • Tax system considerations
    • FPSO contractors – who are the key players?

Tables and charts

This report includes 8 images and tables including:

Images

  • Number of FPSO units installed (2005-2015)
  • Expected FID timeline for pre-FID FPSO projects*
  • New build vs conversion –Pre tax - NPV/boe and IRR*
  • Impact of capital uplift on NPV using Angola PSC*
  • Impact of profit sharing mechanisms on NPV*
  • Leased FPSOs – a more effective way to cut capex?: Image 6
  • Production and cost profile for new-build purchased FPSO
  • Leased FPSOs – a more effective way to cut capex?: Image 8

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