Sector review: Deepwater development

The opening up of reserves further from the coast and the incorporation of satellite fields into deepwater hubs will drive expenditure on pipeline and control lines to over $62 billion, while investment in subsea wells and pipelines and control lines account for approximately 75% of all capex. Platforms are expected to account for around 15% of total deepwater expenditure over the 2010-2014 period (a total spend of $25.4 billion), compared to 17% over the previous five-year period ($21 billion).

Regional updates

Africa is by far the world’s most significant deepwater region. Deepwater activity really began in earnest off West Africa in 2001, with the commencement of production from Total’s landmark Girassol project on Block 17 off Angola. Over the 2005-2009 period a total of $45.1 billion was spent on deepwater developments in the region – approximately two-fifths of this was accounted for by the drilling and completion of some 535 subsea wells.

A large number of world-class development projects are underway or planned for the forecast period and we anticipate that these will push annual regional deepwater Capex above $12 billion. Expenditure over the period is set to total close to $64 billion – over 40% more than the amount spent in the preceding five-year period.

Production in Asian waters has until recently been restricted to shallow water fields, but there are now a number deepwater projects underway or producing. Future deepwater prospects may include relatively unexplored places such India’s Cauvery Basin, and Sri Lanka’s Mannar Basin; Cairn India started a 3D seismic, plus gravity and magnetic pre-drilling survey in the latter area December 2009.

In addition, Douglas-Westwood’s new edition of The World Floating Production Market Report forecasts a strong increase in expenditure over the next few years, driven by a surge in installations – and it predicts that more than 100 Floating Production Systems (FPSs) will be installed worldwide over the 2010-2014 period. This represents a total global value of approximately $45 billion and around a 20% increase on the previous five years.

To date, Latin America has seen the greatest number of FPS installations and its forecast market share is equivalent to almost a third of global FPS Capex over the period. The region’s importance is almost entirely due to the wave of deepwater projects in the Santos and Campos Basins off Brazil moving forward development in the next five years.

Together, Africa, Asia and Latin America account for almost two-thirds of the units forecast for installation over the next five years. Asia is forecast for 23 installations, but only accounts for 12% of the expenditure as a number of the planned installations are redeployments which only require minimal Capex for upgrades.

The relatively benign environments and shallow waters in which most of the FPS prospects in the region are located also allow cheaper FPS solutions to be adopted. In the Western Europe region, despite the fact that many of the producing areas are now considered mature and significant new finds are becoming less frequent, there are still considerable development opportunities – with 18 planned installations.

Global FPS fleet

In terms of vessel type, FPSOs dominate the global floating production scene. As of year-end 2009, there had been more than 220 FPSO deployments worldwide – almost double all the other floating production systems (semi-submersible FPSs, TLPs and Spars) put together. There are currently more than 150 FPSOs in operation. Africa and Asia have the largest fleets, followed by Latin America.

It’s not surprising, therefore, that FPSOs represent by far the largest segment of the market, accounting for close to four-fifths of the total FPS forecast Capex. TLPs and semi-submersible FPSs form the next-largest segments around 10% of the market each (with Spars make up the remainder).

FPSSs have a long history and have proved particularly popular off Brazil where the national operator, Petrobras, has embraced FPS technology as a means of developing the country’s extensive deepwater reserves. There have been more than 80 FPSS installations worldwide; many of these were short-term deployments for early production or well testing purposes.

TLPs, and more recently Spars, have proved the production system of choice in the US Gulf of Mexico. More than half the TLP installations to date and all but one of the spars have been associated with deepwater developments in the US Gulf.

Recent years have seen the introduction of smaller, less expensive designs to enable the exploitation of marginal fields. However, the progression into ultra-deep waters in this region is now working in favour of FPSO solutions (with operators such as Petrobras bringing extensive FPSO experience) and against TLP designs, which are less feasible in ultra-deep waters.

Innovations

The FPS sector is highly dynamic. New design concepts are proposed and often rapidly moved forward by engineering companies, contractors and fabricators. The primary aim of innovation in the FPS sector is to reduce costs not only of the vessels themselves but also of other development components and project operations generally.

If successful, the application of a new FPS design can impact favourably on Capex and Opex for the whole project. With regard to costs (Capex and Opex requirements), an unproven concept must be shown to be significantly cheaper than rival field-proven solutions if it is to compete successfully with them.

One commentator suggests that minimum savings of 10-20% on Capex and/or Opex relative to proven solutions are required to justify the leap of faith that an operator takes in choosing a new FPS design.

Given the high financial stakes involved in FPS-led projects, there is a natural tendency for operators to play it safe and stick with proven

FPS designs rather than investing in a promising but untried concept. Unfortunately – from the point of view of the concept originators, at least – this tendency may actually be reinforced in these key areas of deepwater and marginal projects where, because of their relatively high risks and/or limited rewards, there is even less room for error.

Hence, it is usually the smaller, independent operators (who are by default risk-taking entrepreneurs) that select an innovative design rather than the larger operators.

To date, the majority of FPS developments worldwide have been either semi-submersible FPSs, based on converted semi-submersible drilling rigs, or oil tankers converted into FPSOs. In technical terms this is more evolutionary than innovative, and evolution generally carries less business risk than innovation.

It is only relatively recently that other more innovative concepts – notably TLPs and spars – have become more common. Once a new design gets accepted and successfully deployed, uptake of the idea can be fairly swift – as evidenced by the wave of spar projects currently moving forward in the GoM.

The danger for concept originators is that the acceptance and deployment of a rival FPS solution may result in the exclusion of other concepts targeting the same niche market (for example, the marginal fields off West Africa) on account of operators’ understandable preference for field-proven technology.

One such example of new technology is the Sevan Stabilised Platform (SSP) design, which offers an alternative to the conventional tanker-shaped, spread-moored FPSO. This is accomplished through the use of a circular hull – this dispenses with the need to change the orientation (heading) of the vessel in the face of oncoming waves. This means no turrets or swivels are required, saving cost on fabrication and maintenance.

The diameter of the SSP determines the oil capacity. A large water plane area provides high stability, and allows for a large deck load capacity. All activities are able to be conducted above deck, which can be extended outwards through the use of cantilevers, with cargo, ballast and liquid supplies placed inside the hull. A double-hull formation is generated through the placement of ballast tanks at the periphery of the SSP. Heave-suppression is provided through a bilge-box (an extension of the hull at a larger radius than the main hull and situated at its base).

The design reportedly allows for around 70% less internal piping and cabling compared with a conventional FPSO design, and the hull is constructed from a series of modules. The unique hydrodynamic behaviour of the unit has been extensively tested offshore Norway, simulating conditions in the North Sea and Brazil where the excellent angular and vertical motion behaviour has been verified.

Both scenarios were investigated up to their 100-year storm conditions. The SSP reportedly gives very small pitch/roll motions, improving longevity by decreasing imposed fatigue and stress levels that traditional FPSOs suffer at hanging points for SCR.

Offloading from the SSP FPSO is by shuttle tankers at two stations, 180° from each other and away from accommodations. Tests indicated that tanker yaw motions were moderate or small, as SSP surge and sway motions are smaller than those on a standard FPSO vessel. The design has seen rapid acceptance by the industry, with three SSP now in use, and more under construction.

The hull design has other applications besides production, including use as an accommodation unit, support platform and as an FPDSO (once equipped with a drilling capability). The SSP can be moored using conventional techniques or it can maintain location using thrusters and dynamic positioning.