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Requiring supreme expertise, the floating production system (FPS) has only a few players. The leading players – Mitsubishi Heavy Industries Ltd., Worley Parsons Ltd., Technip S.A, and Hyundai Heavy Industries Corp. Ltd – are focutsed on research and development, enabling them to extract larger quantities of natural gas and crude oil.

Competition among the players is expected to rise, a new report by Transparency Market Research (TMR) suggests.

The lower number of suppliers and the high costs of FPS components are increasing the bargaining power of suppliers. This is expected to change in time as advanced manufacturing technologies will reduce the production cost of FPS components.

“The bargaining power of suppliers is expected to become moderate over the coming years,” states a TMR analyst.

Drilling in offshore regions

There has been a huge demand for crude oil in rapidly industrializing countries such as China, India, and Brazil. This has propelled exploration and production (E&P) companies to carry out drilling activities in the offshore regions. Advanced technologies and strong capital support have accelerated demand for floating production systems, which help E&P companies drill wells in shallow, deep, and even ultra-deep water.

While currently only 9% of the total crude oil comes from subsea, this is expected by 2020, the sector is expected to account for around 20% of the total crude oil production.

Complexity and high cost

FPS projects have gotten more complex, so it is not uncommon for challenging FPS projects to exceed $1 billion. Large FPS systems require huge capital. Challenges such as inability to deliver FPS on time or prolonged delays in the sanctioning can further increase costs.

However, the untapped reserves of crude oil and natural gas will open doors of growth opportunities in the FPS market. The recent discovery of offshore reserves in the French Guiana is one such a growth opportunity.

FPSO growth

According to TMR, floating production storage and offloading (FPSO) in 2012 accounted for 64.7% of the global FPS market. The FPSO segment is expected to retain its leading position in the coming years as it can perform multiple tasks such as floating, production, storage, and offloading.