Deepwater presents new construction opportunities

Oil prices are at their highest level since December 2000, and natural gas prices are up 91% from this point last year, so why is there a shortage of work in the offshore construction market? Maybe the question we need to ask is, "Where are the opportunities?"

David Paganie
ODS-Petrodata

Oil prices are at their highest level since December 2000, and natural gas prices are up 91% from this point last year, so why is there a shortage of work in the offshore construction market? Maybe the question we need to ask is, "Where are the opportunities?"

While the shallow water markets in the North Sea, the Gulf of Mexico, and Southeast Asia are soft, opportunities for field development work are presenting themselves in the deepwater growth regions, including the GoM, West Africa, Brazil, and increasingly Southeast Asia.

This year's international field development survey finds the following "units" in the planning or construction phases: 70 floating production and/or storage units, 271 fixed platforms (two-pile and greater), and 954 subsea trees.

Mergers and moves

Oil and gas companies and drilling contractors have merged to gain market share. With the noose on offshore construction beginning to tighten, construction contractors are following the same strategy to gain market share and increase deepwater-capable assets. Contractors not playing the acquisition game are upgrading their fleets with dynamic positioning (DP) capabilities and purchasing deepwater pipelay and construction equipment.

There is also more interest in the platform salvage market. Platform salvage is as competitive as the platform installation business in the GoM, and maturing regions such as the North Sea and Southeast Asia can be expected to follow suit.

Floating production

The floating production unit is gaining in popularity. Worldwide, 13 units were installed in 2000, 17 in 2001, and 21 units are planned for installation by yearend 2002. This growth trend is expected to continue through the decade, with 25 units slated for installation in 2003 and a further 29 to be installed in 2004 and beyond. Survey results indicate 87 additional projects are anticipated to use a floating production unit for field development.

The number of deepwater discoveries fuels much of the growth in this area. The 2000 survey tallied 40 discoveries in water depths of 1,500 ft or greater. In 2001, 40 more deepwater discoveries were reported, and 28 have been reported to date in 2002. As shallow water fields deplete and more production is needed from deeper waters, oper-ators are trying to expedite field development.

One common practice is to use a floating production unit as an early production system (EPS) before the main life-of-field unit arrives on site. This can accelerate production by two to four years. West Africa, which has 20 floating produc-tion units in the planning or construction phases and 21 more units under study, is seeing the most utilization of the EPS concept. ExxonMobil operates three EPS units in the region.

West Africa achieved another milestone in floating production technology when ChevronTexaco and Single Buoy Moorings signed an eight-year time charter for the first LPG FPSO. This will be installed on the Sanha field in block O offshore Angola, with facility start-up expected in 2005.

The GoM, another growth area for floating production, achieved a milestone of its own this year when the Minerals Management Service sanctioned the use of FPSOs in the region. The MMS has yet to receive an application for an FPSO for installation in the GoM, although Unocal is widely expected to consider this route for its Trident field.

Installations vs. salvage

With operators focusing more time and money on deepwater E&P and increasingly efficient methods of extending the life of mature fields, the number of new shallow water developments using traditional fixed platforms is declining in many areas. Minimal facility wellhead platforms, on the other hand, are still being installed as part of some of the larger field development projects. Operators in Southeast Asia plan to continue using fixed platforms as a mainstay of their development projects, with 63 units planned or under construction and a further 100 platforms on the drawing boards. The other active areas for this type of project are the GoM, with 64 units under construction, and West Africa, where 57 fixed platforms are due to be installed.

A decline in the number of fixed platform installations does not mean that offshore construction contractors have no work. In the GoM, the North Sea, and the Southeast Asia, where there are many mature facilities, fixed platform decommissioning and removal should present significant business opportunities for offshore contractors. In the GoM, the fixed platform removal market is already highly competitive. Platform salvage has outpaced or matched fixed facility installations since 1999.

Subsea – fast-tracking

field developments

Subsea production systems can potentially extend the life of mature, shallow water fields and fast-track a deepwater discovery to start-up. Worldwide, 345 subsea trees are planned for installation by the end of the year, followed by 322 in 2003 and 301 in 2004 and beyond. New, advanced multi-service vessels give operators another installation option besides the on-site mobile drilling rig. As long as the industry continues funneling money into research, we will continue to see subsea production extending the possibilities for field development plans.

Mergers, expanding fleets

Construction contractors are restructuring their organizations through mergers and acquisitions to gain market share as well as to cut costs. In May, Halliburton Subsea and DSND Subsea ASA combined to form Subsea 7. The objective was to gain market share in the growth regions of West Africa, Asia Pacific, the GoM, and Brazil and to combine assets for a competitive advantage. Subsea 7's fleet now comprises 112 ROVs, four pipeline construction yards, and 23 DP deepwater pipelay and construction ships.

Saipem is set to complete acquisition of Bouygues Offshore S.A. by yearend. The new company plans to become a world-class EPIC contractor through the combination of Saipem's construction fleet and Bouygues Offshore's engineering and project management.

Construction contractors not looking at corporate acquisitions are expanding deepwater-capable vessel fleets in search of a competitive advantage. Cal Dive took delivery of the Q4000, the first deepwater, semisubmersible vessel designed to perform construction and well intervention work in water depths up to 10,000 ft. Torch contracted with Smit International to purchase the Express (now the Midnight Express), which will be converted into a deepwater DP-II construction vessel to be in service by mid 2003. Torch also signed a three-year bareboat charter agreement with Cable Shipping Inc. for the G. Murray to add a deepwater pipelay presence.

What's next?

Floating production, drilling, storage, and offloading vessels (FPDSO) are one possibility for the future. Offshore field development hinges upon successful exploration and operators' budgets. So, until we are ready to embrace new sources of energy, oil and gas companies will continue to invest heavily in deep and ultra-deep exploration, which will lead to the creation of new field development concepts suitable for operation in these areas.

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