Economic Benefits of FPSO Construction and Deployment in the Gulf of Mexico

Abstract

Abstract As oil and gas production in the Gulf of Mexico has moved to larger fields farther offshore, increased logistical and technical difficulties have mandated selection and utilization of increasingly complex floating production systems. Yet to be adopted, but viable candidates for developing fields in increasing water depths, are Floating Production, Storage and Offloading (FPSO) units whose practical application has been proven in most other offshore producing provinces worldwide. While questions have arisen about the timing of FPSO deployment in the Gulf of Mexico, it is likely that several units will be employed in the near to medium term as field conditions, project economics and logistical considerations warrant their selection. Given current concerns about pollution risk, it is almost certain that FPSO's deployed in the Gulf of Mexico will, by regulatory mandate be double-hulled, double-bottomed, new-build units. It is also likely that a substantial number of these units will be of primarily U.S. construction due to pressure for local content; availability of construction finance underwriting from the U.S. government (loan guarantees approved under the federal ship financing program know as Title XI and administered by the Maritime Administration [MARAD]); availability of Gulf Coast building and outfitting yards; and local competence in Gulf of Mexico production parameters. Construction and outfitting of an FPSO and possible associated shuttle tankerage on the Gulf of Mexico will require expenditures of approximately U.S. $159 to U.S. $239 million. These funds will, in turn, generate economic benefits to the region of U.S. $463 to U.S. $720 million (with shuttle tanker construction) using an industry accepted economic multiplier of 2.0 to 2.5. These funds will be dispersed to the economy through direct and ancillary employment; local, regional and federal taxation; and increased demand for capital and consumer goods. FPSO Development Scenarios in the Gulf of Mexico At present, there are approximately 40 discovered fields in the deepwater Gulf of Mexico that might be candidates for development by FPSO. In most cases, the fields are outside reasonable reach of an established pipeline infrastructure, making an FPSO's tanker offloading system an attractive alternative to deepwater pipeline installation. Since recovery ratios, production rates, fluid and reservoir conditions, and logistical requirements vary from field to field, a generic FPSO development scenario was developed for this paper to illustrate an economic benefit analysis format rather than an economic benefit analysis for a specific Gulf of Mexico asset. With regard to a generic development analysis of a field within the limits of those noted above as possible candidates for FPSO development, the following development assumptions were made for the purpose of this paper.