The Strategic Role of FPSOs in Offshore Energy
From Historical Roots to Economic Realities, How Floating Production, Storage, and Offloading Units Shape the Offshore Project Value Chain, Timelines, & Drilling Demand in Todays Oil & Gas Industry
1. Introduction
2. A Brief Primer on the History of FPSOs + Basic Need
2.1 Why Use FPSOs?
3. FPSOs: A Technical Overview
3.1 Processing
3.2 Storage
3.3 Offloading
3.4 Component Parts
4. FPSO Supply Chain & Lead Times
4.1 Hull Fabrication
4.2 Topside Modules
4.3 Umbilical’s & Flowlines (Subsea)
4.4 Mooring & Turrets
4.5 Rotating Equipment
4.6 Power Systems
4.7 FPSO Sizes & Costs
5. New Build FPSO v Conversions: Economic Considerations
6. FPSO Geographic Footprint + Market Dynamics
6.1 Guyana
6.2 Brazil
6.3 Angola
6.4 Surinam
6.5 South Africa & Namibia
7. Importance of FPSOs in Offshore Projects
7.1 Supply
7.2 Oil Pricing
7.3 Industry Response to Delays
8. The Big Picture: FPSO Long Term Set Up
8.1 Backlog + Positioning of Major FPSO Manufacturers
9. Concluding Thoughts
10. Exhibits
A. Components of an FPSO
B. Number of FPSO’s through the Years
C. FPSO Demand Ramps
D. Brazil Pre-Salt Drives Incremental Demand
E. FPSO Demand Through the End of the Decade
F. Demand for FPSO in Guyana Grinds Higher
G. Growth in Floating Production Systems from 2024-2033
H. Offshore Orderbook by %
I. Bluewater Active FPSO Fleet
J. Spec List for Bluewater FPSO
K. Africa Offshore Footprint
L. Offshore Breakeven for Undeveloped Reserves
M. Path to Market
N. FPSO World View x2
O. Huatai Financial Sees Rising Demand and Pricing Power May 7th, 2025
P. SBM Offshore Fast4Ward
Q. SBM Offshore Geographic Footprint + Demand Map
R. Modec x Exxon
S. Modec x Shell
T. Yinson Global Projects
U. Yinson New Builds
V. NOV Inc Onshore Revenues 2019 v 2025
11. Sources
Introduction
From 2021-2024 project capex offshore ramped significantly and day rates expanded for all vessel classes be it drillers, offshore support vessels, and any other floating piece of metal in the offshore value chain. The reason for doing this piece is to outline the importance of Floating Production Storage and Offtake (FPSOs) and what they can tell us about the future of drilling activity around the globe. The installation of FPSOs accounts for a significant amount of offshore project capex with long lead times on an absolute basis. The FPSO comes in the latter half of the project development and drilling activity begins shortly after installation. The process from FEED to FID to first oil is roughly a 5-year process with the FPSO being delivered in late year 3 to early year 4.
In this piece we will walk through a brief history, talk through some esoteric but important information on the component parts to an FPSO, look at the manufacturing of FPSOs, major players in the space and project economics. There is much to discuss around the topic of FPSOs, and I think by reading this primer one can gain conviction and a better understanding of where we are in the capex cycle offshore and why we saw some weakness in 2025. Our firm has a deep value, deep research orientation and our motivation for this thesis came from our study of the offshore project value chain broadly. It is a core belief that what we saw in 2025 was nothing more than delays caused by construction and delivery of FPSOs that need to be matched with the rest of an offshore project’s development. This was not a story of oil pricing causing uncertainty or project cancelations, but a story of FPSO lead times and the matching of project development with FPSO delivery dates. Let’s dig in.
“And so, there's drilling to be done out there. It's just sort of one part of the supply chain slowing -- which is drilling, when activity is slowing down a bit to a lot of the other part of the supply chain, which is the FPSOs to get caught up and come online, and kind of matching those activities together. I think that's the root cause of the white space phenomenon.” – Clay C Williams, President & CEO NOV Inc
Fig. 1 FPSO Components
A Brief Primer on the History of FPSOs + Basic Need
Since the 1970s there have been roughly 500 Floating Production Systems built in the world with storage capacity for the oldest models of just 11,000 barrels of oil equivalent. As the world made new discoveries and water depth increased over the last 50+ years FPSOs have stepped up their capabilities with the largest storage capacities today being more than 2M barrels and processing capabilities of 250K boe/d vs just 30K for the original models in the mid-1970s. This wave of massive technological advancement has come with a step up in cost from $200M to $3B for the highest capability vessels on the market today.
The first FPSO as we know them today came to market in 1977 on the Castellon Field in the Spanish Mediterranean. Shell converted this vessel from a Very Large Crude Carrier (VLCC), and it had the ability to store 1M barrels of oil and produced 60K boe/d. The vessel was commissioned and built in Norway by Moss Rosenberg Verft and was decommissioned in 1985 because of declining production in the Castellon field. Though this FPSO had a relatively short life, today’s FPSOs can be moored in place for 20+ years and have added significant flexibility and efficiency to the production of shallow and deep-water fields. The need for FPSO’s came about after 30 years of offshore production that required oil platforms and pipeline systems that had to be fixed to the seabed.
Why Use FPSOs?
FPSO’s provide two key strategic advantages over a fixed platform structure. First, there are some projects in the world that are not long dated in nature, therefore the cost of permanent installation of pipelines on the seafloor or a fixed asset simply are not economic when you account for the high cost of decommissioning. The second advantage to an FPSO is they provide much more flexibility in deep water locations where seabed pipelines are simply uneconomic. FPSOs gain economic advantage the deeper and more remote the basin it is assisting. Advances in FPSO technology and scale have enabled offshore projects in water depths that Mr. Rosenberg could have only dreamt of in the 1970s and certainly for the first oil producers in the 1940s.
Fig. 2 Worlds First FPSO 1977
FPSOs: A Technical Overview
FPSOs are the backbone of the offshore oil and gas development value chain. Like an oil rig, they harvest oil from the seabed and due to their mobility, they can reach in situ reserves that would be much more challenging to obtain using a standard oil rig. In addition to extraction, the vessels offer a host of storage, processing and offloading capabilities. Let’s walk through each.
Processing
An FPSO can store hydrocarbons from deep water and ultra deep-water formations. They also separate and treat oil products with equipment such as risers, manifolds, and modules. Modules possess heating and separation technology that treat imperfections in crude oil.
Storage
In terms of storage capabilities, FPSOs contain tanks on board that are offloaded into oil tankers that then transport the crude oil to a refinery.
Offloading
Crude oil is stored onboard the FPSO once it is tied into a producing basin and that oil can then be offloaded onto an oil tanker to transport the hydrocarbons for refining purposes.
Component Parts
1) Hull
Outer shell of the vessel that is built to meet the demands of the FPSO itself and can be built from scratch or repurposed from a tanker.
2) Mooring Systems
These systems anchor the FPSO in place and include component parts like mooring lines and connectors that must be built to withstand extreme weather & water conditions.
3) Topside
This refers to the essential processing equipment in the upper part of the vessel and is a critical piece of the asset.
4) Risers
Risers act in unison with the mooring system to absorb motion from choppy waters or poor weather conditions to position the vessel and keep it in place for the safe extraction of hydrocarbons through the system.
5) Turret
Piece of the vessels hull that help with directional control while the asset is anchored in place, coming in handy during strong winds & overall choppy ocean waters.
6) Separators
These act as a guide for the hydrocarbons that are being extracted. The separators use the variance in density to ensure oil, gas, and water are gathered in the appropriate storage facility.
7) Technological Advancements Example: Double Bottom Design
Double Bottom Designs add an extra layer between the cargo (oil or gas, for example) and the sea itself. If, for some reason the outer hull was breached, the damage to the ocean would be marginal or nonexistent. The International Convention for the Prevention of Pollution from Ships requires double hulls for oil tankers more than certain sizes, adding extra cost to operate these vessels, making it harder to convert older, cheaper old tankers into FPSOs, for example.
Fig. 3 FPSO Parts
FPSO Supply Chain & Lead Times
Having identified the main components of an FPSO, I felt it prudent to make note of the process of construction and what one could expect in terms of steady state lead times.
Hull Fabrication
Manufacturing the hull is typically the most time-consuming piece of the process for building an FPSO with an estimated lead time of 24-30 months from steel-cut to the day the vessel sails away from the yard. To assist in this process SBM is investing in pre-ordered generic Multi-Purpose Floater (MPF) hulls to help facilitate a faster, more reliable production lead time.
“Through our Fast4Ward concept of standardized MPF hulls, we have a consistent approach to accelerating time to market, which derisks field developments and set industry-leading performance standards as demonstrated by FPSO Prosperity in early 2024. High levels of uptime and an excellent track record in asset management is evident with the 96% uptime for 16 units in 2024.” -SBM 2/20/25 Earnings Q&A
Topside Modules
The estimated lead time for a topside module is 12-18 months given the current tightness in topside manufacturing capabilities.
Umbilical’s & Flowlines (Subsea)
Current lead times stand at 18-24 months with a strong backlog of order book intake as offshore activity continues to ramp overtime. NOV cites a strong order backlog in its flex pipe business and is a good readthrough for many of these essential component parts.
“Our growing backlog within energy equipment reflects the high demand for NOV production equipment arising from the sharp expansion of deepwater FIDs, and the developments I noted earlier, particularly in offshore production processing and subsea flexible pipe.” – NOV Inc 2/5/2025 Earnings
Mooring & Turrets
Lead times for these systems are 20-26 months and are rapidly increasing in demand. NOV Inc in its July 9th, 2025, release stated their book-to-bill ratio for their Turret Mooring System business was more than 200%.
Rotating Equipment (Turbines & Compressors)
This segment of the FPSO supply chain has seen lead times of 18-24 months with items like compressors and turbines to blame for the project deferrals we have seen throughout 2025.
Power systems
There are three main engines that are used to power an FPSO. The majority of FPSOs in the world today are open cycle gas turbines making up roughly 80-90% of the global fleet. Reciprocating engines powered by gas or diesel make up another 5-10% of the fleet with steam combined cycle engines making up 5% of the global fleet. There are puts and takes to the use of each engine, and while most of the fleet is OCGT due to lower capex requirements, there is a push due mostly to climate concerns to build out more sustainable and efficient fuel sources with commensurate cost increases. For example, Petrobras’s P84/85 vessels are all electric, targeting the roughly 70% emissions footprint from an FPSO by way of its power generation system, making it low hanging fruit to cut carbon if economics allow for it.
Fig. 4 Open Cycle Gas Turbine
FPSO Sizes & Costs
FPSOs are classified in size by their production capabilities. While you will notice prices have increased for every major vessel class, the technical capabilities have as well. From 2010-2015 the flagship FPSOs had a nameplate capacity of 90-120K boe/d, less than 200 million standard cubic feet per day (MMscf/d), and stored just 1 million barrels (mmbbl) running on open-cycle gas turbines (OCGT). Today, FPSOs can run on all electric drives or Steam gas turbine combined cycle (GTCC), produce 220-250K boe/d, handle 400-600MMscf/d of gas and can store 1.5-2mmbbl. The costs associated and classifications are mapped out as such:
1) Small FPSOs (<60K boe/d)
2) Medium (60-140K boe/d)
3) Mega (>180K boe/d)
If we make a simple comparison of costs from a decade ago, prices have risen at 3%, 4%, and 6% CAGRs respectively by each sizing category:
Fig. 5 Sizes of FPSOs
New Build FPSO v Conversions: Economic Considerations