The fastest-growing business segment for oil field service and equipment company FMC Technologies Inc. just got a little bigger with the company's Sept. 21 signing of a $520 million contract to manufacture and supply subsea production equipment for a deepwater-development project off the Angola coast.
FMC Technologies signed the deal with Total Exploration & Production Angola. FMC will manufacture 36 subsea trees, wellheads and controls. The company also will supply eight manifolds, two workover systems and associated tooling and equipment. FMC expects to make its first deliveries in early 2012. The project consists of the Cravo, Lirio, Orquidea and Violeta, or CLOV, discoveries located in approximately 4,500 feet of water in Block 17 offshore Angola.
FMC Technologies' subsea systems business includes equipment and technologies -- such as wellheads, trees and subsea controls -- used to explore, drill and develop offshore oil and gas fields.
The business accounts for more than 70% of FMC Technologies' revenue, noted Chairman and CEO Peter Kinnear in a presentation at the Barclays Capital 2010 CEO Energy - Power Conference. FMC's subsea systems has advanced at a 22% compound annual growth rate since 2005.
Kinnear estimates FMC Technologies is the No. 1 subsea systems producer, holding 46% of the total market share. Growth in the area has been driven by the oil industry's increased focus on deepwater exploration. By 2013 the deepwater rig fleet is expected to expand by 32%, Kinnear noted in his presentation.Kinnear said the company is competing for 15 proposed deepwater projects over the next year-and-a-half valued at $150 million each. He cited subsea processing and light-well intervention as two of the largest growth areas in the subsea segment.
In subsea processing, the company has signed major contracts with oil producers for older fields, known as brownfields, where production is declining and new fields where the oil is heavy and difficult to move to the surface, Kinnear says.
In 2009 the company signed a $90 million contract with Brazil's Petrobras for brownfield oil recovery at the Marlim field in offshore Brazil. FMC Technologies is providing an oil/water separation system for Petrobras.
He also noted the company is providing a similar system to separate water from the oil being produced at Total SA's Pazflor project in offshore Angola.
Another growth area is light well intervention, Kinnear says. There are about 4,000 aging subsea wells that require some type of intervention to boost production rates. The process can be performed using a rig, but rigs can be expensive. Light well intervention is a more affordable option that utilizes dynamically positioned vessels instead of large, anchored drilling rigs.
The company has been awarded contracts by Statoil and BP in the North Sea for light well intervention technology.FMC also is talking to operators in Gulf of Mexico about the technology, Kinnear says.
The FMC Technologies is seeking multiyear contracts of at least three or four years for new light-well intervention installations, Kinnear says.
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