Construction of most of the world’s production, storage and offloading (FPSO) vessels will be hit by delays of up to six months because of coronavirus, according to research from Rystad Energy.
Construction of most of the world’s production, storage and offloading (FPSO) vessels will be hit by delays of up to six months because of coronavirus, according to research from Rystad Energy.
Out of a global total of 28 FPSO vessels that are under construction, 15 are being built at shipyards in China while seven are being built in South Korea and Singapore. Rystad Energy expects the outbreak of the coronavirus to cause extensive staffing and supply shortages in these countries that will in turn delay project deliveries by at least three to six months.
If the epidemic escalates, the delays could increase to nine or even 12 months, especially taking into account the restricted time windows for heavy transport, installation and hook-up. The average development time for an FPSO is 36 months, meaning that companies could face a 30% delay.
‘Although operators and contractors are looking into ways to make up for some of the time that will be lost by fast-tracking other stages of development, we anticipate first oil or gas for these projects will face clear delays,’ said Rystad energy partner and head of oilfield service research Audun Martinsen.
Rystad Energy expects projects may still have to contend with 30% to 50% fewer work hours. Construction progress may also be slowed by supply delays, as the delivery of bulk materials, modules and equipment is hampered by transportation restrictions both within and outside of mainland China. The plant utilization rate in China’s equipment manufacturing sector has now fallen to less than 10%.
In addition, project management will face severe issues as travel bans restrict contractors, engineering firms, certification companies and E&P officials from accessing shipyards.
As the virus has caused reduced industrial activity and travel restrictions in China and beyond, much of this year’s global expected oil-demand growth will be lost.
Lower oil prices will result in oil and gas companies scaling budgets, especially shale operators in the US as well as some offshore exploration and production (E&P) players.
‘Our current assessment forecasts that COVID-19 could result in global E&P investments falling by around $30 billion in 2020 – a significant hit to the industry,’ Martinsen said.
