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Axiom publishes analysis on offshore floating production market and its future

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30 June 2020

Axiom EMI have said that as a result of Covid-19 and low oil prices, the oil and gas floating production market is expected to shrink by 20% over the next five years. Axiom have explored the potential for floating wind and aquaculture to mitigate some of this market contraction:


The above chart highlights Axiom’s view on how the 2020-2024 floating production market has evolved through February to June 2020 [analysis includes FPSO, FLNG and Other FPS facilities, excludes FSRU, FSOs and barges].

Recent global events have negatively impacted the expected volume of floating production installations by -20% over the five-year forecast. As stated in Axiom's previous subsea focused articles (covid-19 and the oil price, and subsea project cancellations and delays), much of this market erosion is attributed to project schedule slippage and deferments of pre-FID projects. As a result, Axiom do not expect to see floating production installations recover to 2019 volumes until 2023 at the earliest. 

Short-term installation activity is expected to be relatively resilient, with only one unit slipping from Axiom's previous 2020 forecast expectation. Meanwhile, 2021 remains broadly on target. 

The period 2022 through 2024 is where Axiom expect current market conditions to have the greatest impact on facility installations, with eleven assets stripped from the forecast. This equates to an average of around 10 installations per year for the coming five years, well below the 14 witnessed through the past five years. 
For a number of years the industry supply chain has recognised the need to diversify into floating solutions and services that lie outside of the traditional oil and gas markets. The global drive to reduce carbon emissions has underpinned the importance of offshore renewables in the future energy mix. Deeper water wind developments, beyond the water depth capability of fixed turbine structures, are sizable untapped power reserves requiring floating turbine solutions. 

The floating wind sector is very much in its infancy when compared to the deep water oil and gas market. Small demo projects intended to prove technologies and approaches have been undertaken by the likes of WindPlus, Equinor, Eco Power Company and the Fukushima Offshore Wind Company. These projects are typically within the 50-250m water depth range. They utilise only a handful of floating turbines with power outputs in the range of 2-30MW, and apply semi-sub or spar type hull structures. 

The next generation of floating wind projects will lean on the lessons learned from the past ten years of small-scale demo project undertakings. Infrastructure scaling is a key component to increasing the sectors power generation potential. The application of higher rated turbines and larger hull structures to support them are in various stages of development. Around 80MW of floating wind power is currently operational, this is forecast to increase to c.400MW within the next five years. 

Oil companies are also expected to play a larger part in the future of the sector as they look to diversify their portfolios and improve their green credentials. Major companies such as Royal Dutch Shell, ExxonMobil, Total, OMV and Equinor all have floating wind projects in their pipelines, with others looking to participate in the market in the coming years.

The opportunities the sector presents to the oil and gas supply chain are far reaching. These include engineering and project management, floating structure fabrication, mooring solutions, marine installation and services, site and seabed survey, hull and "topside” transportation, nearshore intervention & trenching, IMR and life-of-field. 

Another applicable floating technology gaining traction is driven by the demand for environmentally sustainable fish supplies. The development of floating aquaculture solutions opens up coastal areas that, have not yet been accessible to the industry. Nordlak has been granted 21 licenses by the Norwegian Government for the Havfarm project; 13 for Havfarm 1 and eight for Havfarm 2. 

Havfarm 1, one of potentially three large scale floating fish farms, is currently being installed. The 430m semi-catamaran structure was fabricated by CIMC Raffles in Shandong Province and transported from China to Norway on the deck of the Boka Vanguard. The Havfarm 1 will be fixed on station by a turret mooring system, again utilising proven oil and gas solutions. 

Havfarm 2, also being fabricated by CIMC Raffles, is expected to be self propelled and will utilise a mobile anchor system for station keeping under normal operation. In addition, Havfarm 2 is expected to be equipped with dynamic positioning allowing for un-moored station keeping and relocation to differing production sites throughout its life time, highlighting further applications of oil and gas technologies. 

While the volume of opportunities presented to the oil and gas supply chain by the aquaculture industry are smaller than those expected in the floating renewables sector, opportunities do exist. The global appetite apatite for fish is increasing, and with concerns around greenhouse gas emissions from conventional livestock farming, sustainable fish production is one approach that can partially displace meat consumption and actively manage associated emissions while sustaining wild fish stocks. 

The negative impact of Covid-19 and the low oil price environment on the oil and gas floating facilities market has accelerated supply chain sector diversification. Company operational structures have been optimised to provide a wide array of expertise and capacity to emerging demand drivers. While viewed as marginal during oil and gas industry boom times, the diversified floating market is more important than ever and will continue to grow at pace as we work towards a carbon neutral world. 

Havfarm 1, image courtesy of Boskalis
Axiom publishes analysis on offshore floating production market and its future