Oil and gas thrives amid energy transition delays

The global energy landscape is undergoing a monumental shift. The International Energy Agency has forecasted that energy demand will more than double by 2050, presenting both a massive challenge and an opportunity for the oil and gas industry, which will continue to play a pivotal role in meeting the world’s energy needs.

Offshore oil platforms, particularly floating production, storage and offloading (FPSO) units, have long been a cornerstone of the global energy sector and will continue to benefit from a robust project pipeline for years to come.

Decarbonisation drives innovation

However, the rising emphasis on decarbonisation, along with the rapid growth of renewable energy and low-carbon fuels in recent years, has pressured the exploration and production (E&P) industry to adapt. To align with environmental, social and governance requirements while increasing production levels, the sector has been compelled to innovate and implement increasingly advanced low-carbon technologies.

Today, the E&P industry is making significant strides in reducing greenhouse gas emissions through a range of innovative solutions. These include the deployment of combined-cycle gas turbines and closed-flare systems on FPSO topsides, advances in post-combustion carbon capture systems, and the development of fully electric platforms. This adaptability has already yielded measurable results in important global markets, with many newly sanctioned FPSO projects – both newbuilds and conversions – incorporating a variety of these cutting-edge technologies to address these emerging demands.

FPSOs in key markets

Offshore projects, particularly those in Brazil and Guyana, are leading the charge, with billions of dollars having been invested in new platforms and deepwater exploration. EICDataStream has identified that Brazil (US$89bn) and Guyana (US$42bn) will be two of the world’s largest FPSO markets by the end of the decade, with Norway, Australia and Angola completing the top five.

Most sanctioned FPSOs will be used to extract oil and gas for Petrobras in Brazil’s ultra-deepwater pre-salt fields, accounting for nine out of 12 FPSOs producing nearly 2m barrels per day (bbl/d). In Guyana, ExxonMobil’s FPSOs in the prolific Stabroek block, northwest of Brazil’s Equatorial Margin, will produce 750,000 bbl/d from three units.

In 2024 alone, three newbuild FPSOs have been sanctioned in Brazil and Guyana. In April, the Whiptail field was approved as part of Stabroek’s sixth development phase, with the 250,000 bbl/d Jaguar FPSO. In May, Seatrium secured an EPC contract for the P-84 (Atapu) and P-85 (Sépia) FPSOs, each of which can process 225,000 bbl/d in Brazil’s Santos Basin.

Other notable developments in 2024 included Angola’s first large deepwater project in the Kwanza Basin, with TotalEnergies’ final investment decision (FID) for the 70,000 bbl/d Kaminho FPSO. Meanwhile, in Suriname, a US$10.5bn investment was committed to the country’s first FPSO – a 220,000 bbl/d unit that will develop the GranMorgu field in Block 58.

Energy demand will more than double by 2050, presenting both a massive challenge and an opportunity for the oil and gas industry

Emerging markets drive growth

Emerging markets are expected to present significant growth opportunities in the coming years. For instance, in Suriname, areas such as Block 52 are still in the early stages of development, but the potential for suppliers remains strong.

Similarly, Namibia’s deepwater opportunities in the Orange Basin, such as TotalEnergies’ Venus project and Galp Energia’s Mopane discovery, offer promising prospects. Offshore Malaysia is also poised for activity, particularly as the 50-year-old Kikeh FPSO may be replaced by a smaller unit in the near future.

Oil and gas dominance

Oil and gas projects have traditionally been the core business for many developers and contractors, securing FID due to predictable and rising demand for oil, high returns and a well-established supply chain. In contrast, a significant number of energy transition projects around the world – such as low-carbon hydrogen, carbon capture and storage, and carbon capture, utilisation and storage initiatives – have not yet reached FID. Factors contributing to this include inflated costs, funding gaps, unclear regulatory frameworks and slow demand growth. These challenges have led to frequent delays and cancellations, further widening the gap between net-zero targets and actual progress.

Supply chain pressures

Despite the relative advantages in the market, the global FPSO industry faces several challenges, including soaring costs for goods and services post-COVID-19, increasing pressure on the supply chain to meet rapidly evolving quality standards while delivering within schedule, and growing difficulties in securing financing from private banks, resulting in unsuccessful tenders for leased units. These issues have forced even world-class operators to rethink platform designs and contracting models. In 2024, most of Petrobras’ FPSO tenders released under long-term charter models saw limited and overpriced bids. As a result, revised tenders are shifting to build operate-transfer processes, a model thatis more common in Guyana than in Brazil.

Oil and gas projects have been the core business for many developers and contractors, securing FID due to predictable and rising demand for oil, high returns and a well-established supply chain

Cooperation and support are key

The energy industry is at a pivotal moment. Stakeholders must navigate complex challenges and strategically align their efforts to ensure there will be a steady pipeline of oil and gas projects after this decade. At the same time, there is a critical need to accelerate the energy transition, which will make real opportunities available for the supply chain. Plenty of work awaits in traditional sectors, and cooperation and support will be essential to expand the energy supply chain and facilitate a smooth, timely transition to more sustainable energy solutions in the coming decades.

By Lucas Ramos, Lead Energy Analyst (CAPEX) – Americas, EIC

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